ABSTRACT
This chapter examines the determinants of income appropriation in a sample of large and small firms in the United Kingdom. Dobrovolsky made corporate saving (rather than dividends) the dependent variable, because he was interested in corporate saving as a source of investible funds. However, although dividends and savings are complementary, there are differences of opinion about which should be regarded as a primary decision variable when appropriation policy is being formulated. Directors’ remuneration is a straightforward and relatively small item in the case of large firms but its economic meaning in the small firm case is ambiguous and the item accounts for a large proportion of profits. In the case of large firms, the item is deducted from profits as a factor reward accruing to directors for the management services rendered. The United Kingdom tax system allows directors’ remuneration to be treated as a cost within certain limits.
