Contracts, Markets, and Laws in the US and Japan
Edited by Zenichi Shishido
Comments on Part IV: the political economy of legislation
Part IV is a collection of seven informative chapters mainly focused on the (various) roles of government. The first half of Part IV examines the relationship between tax law and corporate law. Obviously, both types of law have a significant effect on corporate behavior, but the relationship between the two has not been examined in detail. The first three chapters in Part IV make an attempt to do so. Chapter 15, “Taxation and incentives in the business enterprise” by David Gamage and Shruti Rana, explores the fact that tax laws tend to create many biases which affect the behavior of managers, employees, and monetary capital providers. Gamage and Rana provide an overview of the interactions between tax law and corporate law, and outline a few examples of how the nature of tax law influences the incentive bargains reached between managers, employees, and monetary capital providers. Chapter 16, “Income tax and incentives for corporate transactions: a Japanese perspective” by Tetsuya Watanabe, considers an important legislative problem, that is, whether or not tax rules should provide an incentive or disincentive for corporate transactions. This chapter picks out and carefully examines several examples of tax law that may affect the incentive bargains in Japan. Chapter 17, “Tax law influences on the form and substance of equity compensation in the United States” by Mark P. Gergen, focuses on tax laws that affect the form and/or substance of equity compensation schemes used in publicly traded corporations in the United States.
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