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Employment Change, Profits and Directors' Remuneration in Small and Closely-Held UK Companies

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  • Watson, Robert

Abstract

This paper investigates the relationship between close company employment change, directors remuneration, and profitability. Employment changes are best explained by retained profits, and the relationship between directors remuneration and taxable profits suggests that remuneration levels are varied so as to minimize directors total tax liabilities. These results indicate that current U.K. public policies, which attempt to increase employment in small firms via increasing their taxable profits, may be ineffective. In the absence of fiscal policies designed to encourage retentions, a large proportion of any increase in taxable profits will be removed from the business without having any direct employment effects. Copyright 1990 by Scottish Economic Society.

Suggested Citation

  • Watson, Robert, 1990. "Employment Change, Profits and Directors' Remuneration in Small and Closely-Held UK Companies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 37(3), pages 259-274, August.
    • Handle: RePEc:bla:scotjp:v:37:y:1990:i:3:p:259-74
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    Cited by:

    1. Robert Cressy, 2006. "Why do Most Firms Die Young?," Small Business Economics, Springer, vol. 26(2), pages 103-116, March.
    2. F Chittenden & P Poutziouris & N Michaelas & T Watts, 1999. "Taxation and Small Firms: Creating Incentives for the Reinvestment of Profits," Environment and Planning C, , vol. 17(3), pages 271-286, June.
    3. P Poutziouris & F Chittenden & N Michaelas, 1999. "Modelling the Impact of Taxation on the Small-Business Economy: The Natwest/MBS Tax Index for the Self-Employed, Sole-Traders, and Partnerships," Environment and Planning C, , vol. 17(5), pages 577-592, October.
    4. M.G. Coombes & D.J. Storey & R. Watson & P. Wynarczyk, 1991. "The Influence of Location upon Profitability and Employment Change in Small Companies," Urban Studies, Urban Studies Journal Limited, vol. 28(5), pages 723-734, October.
    5. Geert Campenhout & Tom Caneghem, 2013. "How did the notional interest deduction affect Belgian SMEs’ capital structure?," Small Business Economics, Springer, vol. 40(2), pages 351-373, February.
    6. Khaled Soufani, 2003. "Small Business Growth and Tax Policy in Canada—A Theoretical Model," Environment and Planning C, , vol. 21(4), pages 567-578, August.
    7. Almus, Matthias & Egeln, Jürgen & Engel, Dirk & Gassler, Helmut, 2000. "Unternehmensgründungsgeschehen in Österreich bis 1998: Endbericht zum Projekt Nr. 1.62.00046 im Auftrag des Bundesministeriums für Wissenschaft und Verkehr (BMWV) der Republik Österreich," ZEW Dokumentationen 00-06, ZEW - Leibniz Centre for European Economic Research.
    8. Hristos Doucouliagos & Janto Haman & Saeed Askary, 2007. "Directors' Remuneration and Performance in Australian Banking," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1363-1383, November.
    9. Valérie Revest & Sandro Sapio, 2008. "Financing Technology-Based Small Firms in Europe: a review of the empirical evidence," LEM Papers Series 2008/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    10. Pooran Wynarczyk & Robert Watson, 2005. "Firm Growth and Supply Chain Partnerships: An Empirical Analysis of U.K. SME Subcontractors," Small Business Economics, Springer, vol. 24(1), pages 39-51, February.

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