Pre-World War I momentum in favour of diffusion of share ownership was sustained up to 1939. On the sell side, pressure to pay dividends, generational considerations, the periodic availability of generous exit terms, and capital-raising for mergers all continued to provide incentives to unwind control. Aspects of income tax and estate tax combined with taxation of profits and periodic economic slumps to do likewise. On the buy side, the signalling properties of dividends, the investment returns shares delivered and surges in investor optimism all continued to fortify demand for shares. Reduced scope for overseas investment and improved protection from stock exchange regulation and intermediaries organizing share offerings provided a further boost. Despite these trends and despite a bias in favour of passivity among new investors, the available empirical evidence indicates a full divorce between ownership and control remained the exception to the rule up to 1940.
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