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The EU Commission proposed a regulation on artificial intelligence (AI) on 21 April 2021, which categorizes the use of AI in “social credit” as a prohibited application. This paper examines the definition and structure of the Social Credit System in China, which comprises various systems operating at different levels and sectors. The analysis focuses on two main subsystems: the database and one-stop inquiry platform for financial credit records, and the social governance tool designed to facilitate legal and political compliance. The development of the commercial customer credit reference is also explored. This paper further discusses the impacts and concerns associated with the implementation of the Chinese social credit system to raise awareness. The objective is to offer insights from the existing system and contribute to the ongoing discussion on regulating AI applications in social credit within the EU.
The Russian invasion of Ukraine illustrates the increasingly judicialized nature of international relations and geopolitics. By viewing aspects of the invasion as illegal – in particular through the identification of war crimes and crimes against humanity – the international response draws attention to the political geographies of international criminal investigation. Human rights groups, academics, journalists, and open-source forensic investigations have joined forces to collect, evaluate and analyze the violent nature of war crimes. While similar shifts in evidence gathering have been observed in the case of the Bosnia-Herzegovina war and the Assad regime's violence against Syrian citizens, the use of evidence-gathering technologies and evidence-securing institutions in the case of Ukraine is distinctive. In this scholarly intervention we seek to illustrate the intimate geopolitics of evidence gathering by zooming in on two different elements that shape evidential procedures in Ukraine: i) the blurring of civilian/military boundaries; and ii) the challenges of access. By evaluating what is new and what is similar to previous war sites, we suggest that these two areas reflect a geopolitics of evidence gathering, highlighting its global-local intimacies. Both these areas are well positioned to foster new research on the (geo)legal nature of war crimes in political geography and beyond.
Virtual currencies have gained popularity as part of the digital transformation of the financial system. In particular stablecoins are becoming increasingly popular with consumers. The tokens, which are pegged to a value and - according to their name - promise price stability, pose significant risks from which consumers need to be protected. This article focuses first on consumerspecific risks (B.) and German consumer protection law and in particular on the applicability of a right of withdrawal from the acquisition of stablecoins (C.). Subsequently, the EU legislator’s effort to minimize price stability as well as transparency and exchangeability risks, the Markets in Crypto-assets Regulation (2023/1114), is examined in terms of its consumer protection instruments (D.).
The Russian invasion of Ukraine illustrates the increasingly judicialized nature of international relations and geopolitics. By viewing aspects of the invasion as illegal – in particular through the identification of war crimes and crimes against humanity – the international response draws attention to the political geographies of international criminal investigation. Human rights groups, academics, journalists, and open-source forensic investigations have joined forces to collect, evaluate and analyze the violent nature of war crimes. While similar shifts in evidence gathering have been observed in the case of the Bosnia-Herzegovina war and the Assad regime's violence against Syrian citizens, the use of evidence-gathering technologies and evidence-securing institutions in the case of Ukraine is distinctive. In this scholarly intervention we seek to illustrate the intimate geopolitics of evidence gathering by zooming in on two different elements that shape evidential procedures in Ukraine: i) the blurring of civilian/military boundaries; and ii) the challenges of access. By evaluating what is new and what is similar to previous war sites, we suggest that these two areas reflect a geopolitics of evidence gathering, highlighting its global-local intimacies. Both these areas are well positioned to foster new research on the (geo)legal nature of war crimes in political geography and beyond.
The Åland Islands archipelago enjoys a special international status sui generis, which essentially encompasses demilitarisation, neutralisation, and autonomy. This status is guaranteed under international law by the agreements of 1921, 1940, and 1947, which are still in force. Furthermore, there are convincing reasons to assume that the Åland Islands regime has grown into European customary law. By virtue of her international (treaty) obligations, Finland cannot unilaterally change this status under the present conditions, irrespective of domestic (constitutional) decisions. While integration into NATO’s collective defence system and the EU’s Common Security and Defence Policy structures is compatible with the special status of the Åland Islands, care must be taken by Finland and her partners to ensure that the obligations arising from these developments are fulfilled in accordance with the demilitarised and neutralised status of the archipelago. This includes that the use by Finnish troops for preventive defence, beyond the exceptions laid down in the 1921 Åland Agreement, is only permitted in the case (of threat) of an immediate and clearly identifiable attack.
The autonomous character of the Åland Islands was established under a League of Nations dispute settlement and implemented, inter alia, in Finnish legislation. Its essence even grew into customary law. The arrangements of 1921, however, do not constitute a bilateral treaty between Finland and Sweden. The UN assumes that the international mechanism to protect Åland’s autonomy did not become obsolete with the demise of the League of Nations, but was only “suspended until such time as an express decision has been taken by the United Nations to put it back into force”. A corresponding proposal could be submitted, in any case, both by Finland and/or Sweden or possibly even by any other UN member state, for discussion in the Sixth Committee. However, the final decision to re-activate this special mechanism would have to be adopted by the UN General Assembly.
EU Law applies to the Åland Islands in principle; however, Finland’s Accession Treaty to the EU to which Protocol No. 2 on the Åland Islands was annexed, established a number of specific rules which are still in force today. This, most notably, results in the limited application of value added tax and excise duties in the Åland Islands. Therefore, the rules on customs procedures apply with respect to the movement of goods to and from the Åland Islands. In addition, other provisions of Union law, in particular those relating to fundamental freedoms and European state aid law, may be relevant in view of the special fiscal status of the Åland Islands. However, assessing individual cases would require further information and in-depth studies. Irrespective of the requirements set out in the said Protocol, the EU is obliged to respect the national identity of Member States pursuant to Article 4 para. 2 TEU; this obligation includes respect for the special status of the Åland Islands under both international and Finnish constitutional law.
Corporate governance is the set of rules, be they legal or self-regulatory, practices and processes pursuant to which an insurance undertaking is administrated. Good corporate governance is not only key to establishing oneself and succeeding in a competitive environment but also to safeguarding the interests of all stakeholders in an insurance undertaking. It is insofar not surprising that mandatory requirements on the administration of insurance undertakings have become rather prolific in recent years, in an attempt by regulators to protect especially policyholders against perceived risks hailing from improperly governed insurance undertakings. In Germany this has been regarded by many undertakings as an overly paternalistic approach of the legislator, especially considering that the German insurance sector has experienced for decades if not centuries a remarkably low number of insolvencies and that German insurers were neither the trigger nor the (especially) endangered actors in the financial crisis commencing in 2007. Notwithstanding the true core of this criticism, that the insurance industry was taken to a certain degree hostage by the shortcomings within the banking sector, the reform of German Insurance Supervisory Law via implementation of the Solvency II-System has brought many advances in the sense of better governance of insurance undertakings and has also brought to light many deficiencies that the administration of some insurance undertakings may have suffered from in the past, which are now more properly addressed.
Bibliometric analysis of research publications would be the basis of the present study which would therefore highlight the inter linkage between the already existing researches which mainly talk about the concept of taxation with respect to it in the sphere of exemption of taxes from a set of organizations. The frequency of the publication on the same would be determined. Keeping in track the frequency of publications about the said exemptions and tax regimes. The topic clearly hasn't got much attention from the researchers. The data was collected from the Scopus and Web of Science database and has been analysed using VOSviewer software. The literature review which was pursued was gathered respectively in order to understand the concept of taxation of these charitable trusts and religious institutions. The study consists of a total of 1773 documents from Scopus and 617 documents from Web of Science (English) which are classified into articles, letters, books and editorial reviews etc. The data which is collected on the same lines would be analysed by the researchers using graphs, tables and charts.
Women are overrepresented in informal employment in the Indian labour market. They also devote more time to unpaid care work than men do. The poor working conditions of women are attributable to this double burden of work. Due to the lack of regulatory measures to protect the interest of informal women workers along with rigid gender norms, women’s participation in paid work is drastically reduced. As far as unpaid care work is concerned, feminist economists have been striving to make such work visible for a long time now. There have been some developments in labour statistics, with time use surveys quantifying women’s paid and unpaid contributions to the economy. This article delves into the examination of unpaid care work in India with the help of the Indian government’s recent Time-use Survey. It attempts to study the connection between paid work and unpaid care work and its implications for the working conditions of women in India. Finally, it evaluates the ‘right to work’ as a possible solution by using the example of employment guarantee schemes in India.
“Protection of the environment“ and “sustainability“ are more significant than ever. The legal system contributes an important share to the protection of the environment. However, an overview of the German private environmental liability law shows that conventional tort law is not a suitable basis for civil liability for the environmental consequences of officially approved emissions of greenhouse gases. In general, one of the main problems of private environmental liability law lies in proving the individual causality of the conduct of an emitter, as the lawsuit of a Peruvian homeowner against a German energy company pending before the Higher Regional Court of Hamm illustratively demonstrates. The outcome of this lawsuit, which may have an outstanding significance for the status and development of private environmental liability law in Germany, is awaited with great anticipation. The article also briefly examines recent developments in private environmental liability law outside Germany and the question to what extent insurance can be an instrument to protect the environment.
In this article, I question the use of the notion of ‘constituent power’ as a tool for the democratization of the European Union (EU). Rather than seeing the absence of a transnational constituent power as a cause of the EU’s ‘democratic deficit’, I identify it as an opportunity for unfettered democratic participation. Against the reification of power-in-action into a power-constituted-in-law, I argue that the democratization of the EU can only be achieved through the multiplication of ‘constituent moments’. I begin by deconstructing the normative justifications surrounding the concept of constituent power. Here I analyze the structural aporia of constituent power and question the autonomous and emancipatory dimension of this notion. I then test the theoretical hypothesis of this structural aporia of the popular constituent power by comparing it with the historical experiments of a European popular constituent power. Finally, based on these theoretical and empirical observations, I propose to replace the ambivalence of the concept of popular constituent power with a more cautious approach to the bottom-up democratization of European integration: that of a multiplication of transnational constituent moments.
Justification: In Mexico, the number of unidentified bodies has been steadily rising for years. By now, more than 50,000 bodies are considered unidentified. Forensic laboratories that could perform comparative molecular genetic investigation are often overburdened and examinations can take months. Therefore, pragmatic approaches that can help to identify more unknown bodies must be sought. The increased use of distinctive physical features might be one, and the high rate of tattooed people in Mexico points towards a great potential of tattoos as a tool for identification. The prerequisite for a comparison of antemortem (missing persons) and postmortem (unknown bodies) data is an objective description of the particularities, e.g., of the tattoos. The aim of this study was to establish an objective classification for tattoo motives, taking into consideration local preferences.
Methods: In the database of the medicolegal services of the Instituto Jaliscience de Ciencias Forenses (IJCF) in Guadalajara, postmortem data of 1000 tattooed bodies from 2019 were evaluated. According to sex and age, the tattooed body localization and the tattoo motives were categorized.
Results: The 1000 tattooed deceased showed tattoos on 2342 body localizations. The motives were grouped and linked to the following 11 keywords (with decreasing frequency): letters/numbers, human, symbol (other), plant, symbol (religious), animal, object, fantasy/demon/comic, tribal/ornament/geometry, other, unrecognizable.
Conclusion: Using the proposed classification, tattoo motives can be described objectively and classified in a practical way. If used for antemortem (missing persons) and postmortem (unknown bodies) documentation, motives can be searched and compared efficiently—helping to identify unknown bodies.
Sudden cardiac death (SCD) in adolescents and young adults may be the first manifestation of an inherited arrhythmic syndrome. Thus identification of a genetic origin in sudden death cases deemed inconclusive after a comprehensive autopsy and may help to reduce the risk of lethal episodes in the remaining family. Using next-generation sequencing (NGS), a large number of variants of unknown significance (VUS) are detected. In the majority of cases, there is insufficient evidence of pathogenicity, representing a huge dilemma in current genetic investigations. Misinterpretation of such variants may lead to inaccurate genetic diagnoses and/or the adoption of unnecessary and/or inappropriate therapeutic approaches. In our study, we applied current (ACMG) recommendations for variant classification in post-mortem genetic screening of a cohort of 56 SCD victims. We identified a total 53 rare protein-altering variants (MAF < 0.2%) classified as VUS or worse. Twelve percent of the cases exhibited a clinically actionable variant (pathogenic, likely pathogenic or VUS – potentially pathogenic) that would warrant cascade genetic screening in relatives. Most of the variants detected by means of the post-mortem genetic investigations were VUS. Thus, genetic testing by itself might be fairly meaningless without supporting background data. This data reinforces the need for an experienced multidisciplinary team for obtaining reliable and accountable interpretations of variant significance for elucidating potential causes for SCDs in the young. This enables the early identification of relatives at risk or excludes family members as genetic carriers. Also, development of adequate forensic guidelines to enable appropriate interpretation of rare genetic variants is fundamental.
Defenders of current restrictions on EU immigrants’ access to welfare rights in host member states often invoke a principle of reciprocity among member states to justify these policies. The argument is that membership of a system of social cooperation triggers duties of reciprocity characteristic of welfare rights. Newly arriving EU immigrants who look for work do not meet the relevant criteria of membership, the argument goes, because they have not yet contributed enough to qualify as members on the grounds of reciprocity. Therefore, current restrictions on their access to welfare rights are justified. In this article, I challenge this argument by showing how restrictions on EU immigrants’ access to welfare rights are inconsistent with duties of international reciprocity. There are different variations of this challenge, but my focus here will be on one that uses a veil of ignorance device to support this claim. What matters from a perspective concerned with international reciprocity, I will argue, is what kind of welfare policy EU member states would choose were they not to know whether those receiving EU migrants were net contributors or net beneficiaries to the relevant scheme of international cooperation made possible by the four freedoms, and freedom of movement in particular. I argue that framing the requirement of reciprocity in this way provides a more comprehensive understanding of what should count as an ‘unreasonable burden’ on the welfare systems of host member states. The paper also examines alternative accounts of ‘unreasonable burdens’. It shows when and how the current institutional structure of the EU could take steps to deal with such burdens by preventing member states from gaming a comprehensive system of welfare rights protections across member states and by recognising the achievements of those member states that best serve them.
This paper analyses, if the Intertemporal Guarantee of Freedom, that was developed by the German Federal Constitutional Court (GFCC), can be used to expand the protection of human rights against the harms of climate change. The case of the Swiss Senior Women shows that there are jurisdictions, where the Intertemporal Guarantee of Freedom could be applied to improve standing and the control standard of states’ climate change action. Within international law bodies with jurisdiction over human rights treaties there are distinctive standards of protection against the harms of climate change. A major deficit within the international human rights protection against climate change lies within the focus on the positive obligations and the corresponding wide margin of appreciation granted to the states. The Intertemporal Guarantee of Freedom could provide a protection expansion in this regard, especially in the case of the European Court of Human Rights. It could also enable and legitimise present human rights concerns focused on the future actions of states following their past inaction. One considerable hurdle that is not addressed by it are procedural hurdles like the Plaumann formula applied by the European Court of Justice. The Intertemporal Guarantee of Freedom cannot solve major problems for climate change litigation like procedural hurdles. Yet, it can provide a new approach for complaints to address unambitious mitigation legislation which will lead to future human rights infringements.
In memory of Brigitte Haar
(2021)
Nachruf auf Brigitte Haar (1965-2019).
This article provides an overview of the current state of the regulation of disinformation in the EU. It shows that the concept of disinformation, the purpose of anti-disinformation measures and their content and enforcement can only be understood if a holistic view is taken of private, hybrid-co-regulatory and public-law norms. The delicate field of disinformation is to a large extent dealt with outside of statutory law. The questions raised thereby are largely unresolved.
The analysis of postmortem protein degradation has become of large interest for the estimation of the postmortem interval (PMI). Although several techniques have been published in recent years, protein degradation-based techniques still largely did not exceed basic research stages. Reasons include impractical and complex sampling procedures, as well as highly variable protocols in the literature, making it difficult to compare results. Following a three-step procedure, this study aimed to establish an easily replicable standardized procedure for sampling and processing, and further investigated the reliability and limitations for routine application. Initially, sampling and processing were optimized using a rat animal model. In a second step, the possible influences of sample handling and storage on postmortem protein degradation dynamics were assessed on a specifically developed human extracorporeal degradation model. Finally, the practical application was simulated by the collection of tissue in three European forensic institutes and an international transfer to our forensic laboratory, where the samples were processed and analyzed according to the established protocol.
On 15 December 2020, the European Commission submitted a proposal for a regulation on a single market for digital services (Digital Services Act, DSA) and amending Directive 2000/31/EC. The legislative project seeks to establish a robust and durable governance structure for the effective supervision of providers of intermediary services. To this end, the DSA sets out numerous due diligence obligations of intermediaries concerning any type of illegal information, including copyright-infringing content. Empirically, copyright law accounts for most content removal from online platforms, by an order of magnitude. Thus, copyright enforcement online is a major issue in the context of the DSA, and the DSA will be of utmost importance for the future of online copyright in the EU. Against this background, the European Copyright Society takes this opportunity to share its view on the relationship between the copyright acquis and the DSA, as well as further selected aspects of the DSA from a copyright perspective.
Combining insights from the history of citizenship with contemporary legal analysis, this article both highlights and problematizes what we may call sorting strategies – restrictive closure and selective openness – which rely on ‘varieties of affluence’ (income, wealth, equity, credit, and the like) in shaping possibilities for entry, settlement, and naturalization. By emphasizing the growing significance of income barriers and thresholds on the one hand, and fast-tracked investment-based entryways on the other, this article investigates the role of wealth as both accelerator and barrier to citizenship, contributing to the varied toolbox used by governments to advance goals that may at times appear contradictory; these tools both tighten and relax the requirements of access to membership at the same time. These new developments represent different facets of the same trend. Without explicitly stating as much, programs that turn wealth into a core criterion for admission conceptually reignite an older, exclusive, and exclusionary vision according to which individuals must hold property (in land, resources, or in relation to one’s ‘dependents,’ including women, slaves, and children) in order to qualify as a citizen. While such a trajectory is no stranT8ger to ancient models, it raises profound challenges to modernist accounts of political membership that place equality at their core.
This research attempts to provide for an overview of the state of co-operation between the United Nations and regional organizations like the CoE, OSCE, EU and NATO during the last Yugoslav wars, considering the 1991-2008 period. In this case, the "reconstruction" of what the organisations did in each of the countries involved in the conflicts, the country-by-country approach used in writing the research and the consideration of both headquarters and field level should facilitate the understanding of the state of things at that time. The research further includes an analysis of the co-operative trends developed by the considered international organisations since the beginning of the 1990s and is concluded by a reflection on the normative relevance of the issue of "international cooperation". In this case, the intention of the author was to go beyond the general policy level approach used for the description of UN-regional organizations interaction and propose a re-consideration of the concept of "international co-operation" as a possible normative tool in guiding the so far nebulous division of tasks of international actors in conflict-related scenarios. In this case, the concise description of the general framework for co-operation under Chapter VIII of the UN Charter, already matter of wide debate by academics and practitioners, sets the frame for a more elaborate, and hopefully innovative, consideration of the notion of "international cooperation". This, of course, is to be contextualized to the lessons learned extrapolated from the case study.
The essay argues that anti-suit injunctions granted in disputes on standard-essential patents are inconsistent with the general standards governing anti-suit injunctions. The section on anti-suit injunction demonstrates that the case law on anti-suit injunctions is not comparable to disputes over standard essential patents. In contrast, anti-anti-suit injunctions are a legitimate response to an extraterritorial assertion of jurisdiction by foreign courts. Under EU law, the courts of member states might even be required to issue anti-anti-suit injunctions to protect their exclusive jurisdiction over patents.
This article provides an overview and critical assessment of WIPO ALERT. It locates this initiative in the broader context of transnational IP enforcement schemes on the Internet. These initiatives are classified into two categories according to their point of attachment and geographical effect. Whereas source-related measures (e.g. website takedowns) tend to have a transnational and possibly even a global effect, recipient-related measures (e.g. website and ad blockings) typically mirror the territorially fragmented IPR landscape. This fragmentation is where WIPO ALERT comes into play. It can be understood as a matching service which interconnects holders of information about copyright infringing websites (“Authorized Contributors”) and actors of the online ad industry who want to avoid these outlets (“Authorized Users”). The critical assessment of WIPO ALERT calls for more transparency and the establishment of uniform substantive and procedural standards that have to be met if a new “site of concern” is added to the global ad blacklist.
Efforts to come to terms with sexual violence against children and adolescents are predicated on a desire to achieve justice. Based on the work done by the Independent Inquiry into Child Sexual Abuse in Germany, this article attempts to identify the interfaces between the Inquiry’s undertakings and the field of transitional justice. Using an approach informed by the theory of childhood, it examines the issues that arise when survivors bear witness to past childhood events. This must adopt a perspective that is sensitive to childhood and adolescence as unique life phases. That, in turn, requires accounting for concomitant factors, such as the context presented by a child’s growth and development, the function of families, the role played by educational institutions, and the legal position accorded children by society. The article thus adopts a framework rooted in childhood theory that considers children both generally as human beings and specifically as children.
We contribute to the debate about the future of capital markets and corporate finance, which has ensued against the background of a significant boom in private markets and a corresponding decline in the number of firms and the amount of capital raised in public markets in the US and Europe.
Our research sheds light on the fluctuating significance of public and private markets for corporate finance over time, and challenges the conventional view of a linear progression from one market to the other. We argue instead that a more complex pattern of interaction between public and private markets emerges, after taking a long-term perspective and examining historical developments more closely.
We claim that there is a dynamic divide between these markets, and identify certain factors that determine the degree to which investors, capital, and companies gravitate more towards one market than the other. However, in response to the status quo, other factors will gain momentum and favor the respective other market, leading to a new (unstable) equilibrium. Hence, we observe the oscillating domains of public and private markets over time. While these oscillations imply ‘competition’ between these markets, we unravel the complementarities between them, which also militate against a secular trend towards one market. Finally, we examine the role of regulation in this dynamic divide as well as some policy implications arising from our findings.
This essay argues that access to water, and the right to water in India is subject to legal pluralism in India: the plurality of state law and the normative order of the caste system in India. While the Constitution of India prohibits discrimination against or exploitation of the Scheduled Castes, society is also subject to a parallel set of social rules set forth by caste hierarchies. The Dalit community has been historically subject to exploitation and limited access to resources, with the use of religious and social sanction, this essay focuses particularly on the right to water, which is an essential part of the constitutional right to the environment is subject to plural legal systems, of state law and caste-based normative orders. Ethnographic social science research, particularly in anthropology and sociology has produced extensive findings on how the caste system limits access to natural resources and particularly water, owing to ideas of purity and impurity associated with water use, and the status of water as a common public good. This essay explores how lawyers must consider legal pluralities when understanding access and management of natural resources. The essay analyses John Griffiths’ idea of legal pluralism which describes a scenario in which not all law is administered by the State or its institutions, and there exists de facto law, beyond the boundaries of the State. This paper expands Griffiths’ model of pluralism to explain how the right to water is subject to both caste order and state law and how the lived reality of Dalits when accessing water is subject to a constant pluralism.
Venture capital-backed firms, unavoidable value-destroying trade sales, and fair value protections
(2021)
This paper investigates the implications of the fair value protections contemplated by the standard corporate contract (i.e., the standard contract form for which corporate law provides) for the entrepreneur–venture capitalist relationship, focusing, in particular, on unavoidable value-destroying trade sales. First, it demonstrates that the typical entrepreneur–venture capitalist contract does institutionalize the venture capitalist’s liquidity needs, allowing, under some circumstances, for counterintuitive instances of contractually-compliant value destruction. Unavoidable value-destroying trade sales are the most tangible example. Next, it argues that fair value protections can prevent the entrepreneur and venture capitalist from allocating the value that these transactions generate as they would want. Then, it shows that the reality of venture capital-backed firms calls for a process of adaptation of the standard corporate contract that has one major step in the deactivation or re-shaping of fair value protections. Finally, it argues that a standard corporate contract aiming to promote social welfare through venture capital should feature flexible fair value protections.
Lack of privacy due to surveillance of personal data, which is becoming ubiquitous around the world, induces persistent conformity to the norms prevalent under the surveillance regime. We document this channel in a unique laboratory---the widespread surveillance of private citizens in East Germany. Exploiting localized variation in the intensity of surveillance before the fall of the Berlin Wall, we show that, at the present day, individuals who lived in high-surveillance counties are more likely to recall they were spied upon, display more conformist beliefs about society and individual interactions, and are hesitant about institutional and social change. Social conformity is accompanied by conformist economic choices: individuals in high-surveillance counties save more and are less likely to take out credit, consistent with norms of frugality. The lack of differences in risk aversion and binding financial constraints by exposure to surveillance helps to support a beliefs channel.
Supranational supervision
(2022)
We exploit the establishment of a supranational supervisor in Europe (the Single Supervisory Mechanism) to learn how the organizational design of supervisory institutions impacts the enforcement of financial regulation. Banks under supranational supervision are required to increase regulatory capital for exposures to the same firm compared to banks under the local supervisor. Local supervisors provide preferential treatment to larger institutes. The central supervisor removes such biases, which results in an overall standardized behavior. While the central supervisor treats banks more equally, we document a loss in information in banks’ risk models associated with central supervision. The tighter supervision of larger banks results in a shift of particularly risky lending activities to smaller banks. We document lower sales and employment for firms receiving most of their funding from banks that receive a tighter supervisory treatment. Overall, the central supervisor treats banks more equally but has less information about them than the local supervisor.
Industry concentration and markups in the US have been rising over the last 3-4 decades. However, the causes remain largely unknown. This paper uses machine learning on regulatory documents to construct a novel dataset on compliance costs to examine the effect of regulations on market power. The dataset is comprehensive and consists of all significant regulations at the 6-digit NAICS level from 1970-2018. We find that regulatory costs have increased by $1 trillion during this period. We document that an increase in regulatory costs results in lower (higher) sales, employment, markups, and profitability for small (large) firms. Regulation driven increase in concentration is associated with lower elasticity of entry with respect to Tobin's Q, lower productivity and investment after the late 1990s. We estimate that increased regulations can explain 31-37% of the rise in market power. Finally, we uncover the political economy of rulemaking. While large firms are opposed to regulations in general, they push for the passage of regulations that have an adverse impact on small firms.
Resolving financial distress where property rights are not clearly defined: the case of China
(2022)
We use data on financially distressed Chinese companies in order to study a debt market where property rights are crudely defined and poorly enforced. To help with identification we use an event where a business-friendly province published new guidelines regarding the administration and enforcement of assets pledged as collateral. Although by no means a comprehensive reform of bankruptcy law or property rights, by instructing courts to enforce existing, albeit rudimentary, contractual rights the new guidelines virtually eliminated creditors runs and produced a sharp increase in the survival rate of financially-distressed companies. These changes illustrate how piecemeal reforms of property rights and their enforcement may have a significant impact on economic outcomes. Our analysis and results challenge the view that a fully fledged system of private property is a precondition for economic development.
The loan impairment rules recently introduced by IFRS 9 require banks to estimate their future credit losses by using forward-looking information. We use supervisory loan-level data from Germany to investigate how banks apply their reporting discretion and adjust their lending upon the announcement of the new rules. Our identification strategy exploits a cut-off for the level of provisions at the investment grade threshold based on banks’ internal rating of a borrower. We find that banks required to adopt the new rules assign better internal ratings to exactly the same borrowers compared to banks that do not apply IFRS 9 around this cut-off. This pattern is consistent with a strategic use of the increased reporting discretion that is inherent to rules requiring forward-looking loss estimation. At the same time, banks also reduce their lending exposure to exactly those borrowers at the highest risk of experiencing a rating downgrade below the cutoff. These loans would be associated with additional provisions in future periods, both in the intensive and extensive margin. The lending change thus mitigates some of the negative effects of increased reporting opportunism on banks’ crisis resilience. However, when these firms with internal ratings around the investment grade cut-off obtain less external funding through banks, the introduction of IFRS 9 will likely also be associated with real economic effects
Using the negotiation process of the Basel Committee on Banking Supervision (BCBS), this paper studies the way regulators form their positions on regulatory issues in the process of international standard-setting and the consequences on the resultant harmonized framework. Leveraging on leaked voting records and corroborating them using machine learning techniques on publicly available speeches, we construct a unique dataset containing the positions of banks and national regulators on the regulatory initiatives of Basel II and III. We document that the probability of a regulator opposing a specific initiative increases by 30% if their domestic national champion opposes the new rule, particularly when the proposed rule disproportionately affects them. We find the effect is driven by regulators who had prior experience of working in large banks – lending support to the private-interest theories of regulation. Meanwhile smaller banks, even when they collectively have a higher share in the domestic market, do not have any impact on regulators’ stand – providing little support to public-interest theories of regulation. Finally, we show this decision-making process manifests into significant watering down of proposed rules, thereby limiting the potential gains from harmonization of international financial regulation.
We employ a proprietary transaction-level dataset in Germany to examine how capital requirements affect the liquidity of corporate bonds. Using the 2011 European Banking Authority capital exercise that mandated certain banks to increase regulatory capital, we find that affected banks reduce their inventory holdings, pre-arrange more trades, and have smaller average trade size. While non-bank affiliated dealers increase their market-making activity, they are unable to bridge this gap - aggregate liquidity declines. Our results are stronger for banks with a higher capital shortfall, for non-investment grade bonds, and for bonds where the affected banks were the dominant market-maker.
The expansion of actors and instruments in sovereign debt markets through bond financing generated a coordination problem among bondholders during the debt restructuring process. There is a risk that an individual bondholder will be passive or act against the restructuring slowing down or even precluding the process of restructuring even though it is in the general interest of bondholders as a group, not to mention the population of the country experiencing the shortage of funds for public welfare. In particular, the disruptions to sovereign debt restructuring by frivolous litigation is considered as one of the main threats.
This dissertation is the first major study devoted to sovereign bonds structured through a trust arrangement and the promising features that such a legal structure possesses for an effective and efficient sovereign debt restructuring. It provides a comprehensive inquiry into the evolution of the mechanisms to coordinate creditors, with a focus on bondholders and institutional frameworks which facilitated this coordination. It examines intriguing primary sources from League of Nations archives and provides in-depth case studies on the functionality of the trustees in sovereign bond restructurings performed by Argentina in 2016 and Ecuador in 2008.
Assessing the utility of trust arrangements to address coordination problems, this thesis is driven by the puzzle: How to better balance (i) the need for smooth sovereign debt restructurings, which by definition entails some losses for creditors, with (ii) bondholders’ legitimate interests? What approach can be used in constructing a legal and institutional framework for trustees to promote the best interest of the bondholders in sovereign debt restructuring? As a solution, it seems that incentives for bond trustees to pursue debt sustainability will achieve both goals.
In this regard, recognition of the concept of debt sustainability, being in substance the IMF and WB debt sustainability assessment, as the best interest of bondholders in sovereign debt restructuring is beneficial from multiple aspects. It enables a bond trustee to excel in its role as a guardian of bondholders by following the best interest of bondholders in exercising its discretion. Moreover, it fosters an equilibrium between the interests of private creditors and a state taking into account its socio-political aspects.
Search costs for lenders when evaluating potential borrowers are driven by the quality of the underwriting model and by access to data. Both have undergone radical change over the last years, due to the advent of big data and machine learning. For some, this holds the promise of inclusion and better access to finance. Invisible prime applicants perform better under AI than under traditional metrics. Broader data and more refined models help to detect them without triggering prohibitive costs. However, not all applicants profit to the same extent. Historic training data shape algorithms, biases distort results, and data as well as model quality are not always assured. Against this background, an intense debate over algorithmic discrimination has developed. This paper takes a first step towards developing principles of fair lending in the age of AI. It submits that there are fundamental difficulties in fitting algorithmic discrimination into the traditional regime of anti-discrimination laws. Received doctrine with its focus on causation is in many cases ill-equipped to deal with algorithmic decision-making under both, disparate treatment, and disparate impact doctrine. The paper concludes with a suggestion to reorient the discussion and with the attempt to outline contours of fair lending law in the age of AI.
We investigate the impact of uneven transparency regulation across countries and industries on the location of economic activity. Using two distinct sources of regulatory variation—the varying extent of financial-reporting requirements and the staggered introduction of electronic business registers in Europe—, we consistently document that direct exposure to transparency regulation is negatively associated with the focal industry’s economic activity in terms of inputs (e.g., employment) and outputs (e.g., production). By contrast, we find that indirect exposure to supplier and customer industries’ transparency regulation is positively associated with the focal industry’s economic activity. Our evidence suggests uneven transparency regulation can reallocate economic activity from regulated toward unregulated countries and industries, distorting the location of economic activity.
The dissertation explores to what extent the post-financial crisis EU resolution regime, based on equity/debt write-down and conversion powers and bail-in tools will be effective in maintaining the stability of bank groups. To arrive at its unique angle, it first asks why bank groups are considered complex, thereby explaining the reasons for their proliferation and instability, and how this may inform the view regarding a desired regulatory framework. The main observation the dissertation makes is that, notwithstanding of other factors already pointed out in the literature, bank groups adopt complex structures with multiple entities, as it allows them, inter alia, to use double-leverage financing structures and internal capital markets.
Double-leverage financing structures allow bank groups to optimise the combination of their debt/equity funding from external parent entity investors with a combination of debt/equity funding downstreamed internally to subsidiaries and other entities in the bank group. An important component within this structure is also that the allocation of the bank group’s resources takes place through the internal capital market (ICM). The allocation of resources via the ICM allows bank groups to manage their liquidity constraint either to undertake activities that are more profitable, or to stabilise the financial position of the group as a whole.
While both double leverage and ICMs can optimise the funding and allocation of resources of the bank group, respectively, they can also generate perils to the stability of the bank group. In particular, this is because double-leverage can result in excessive risk taking and regulatory arbitrage. Moreover, the allocation of the intra-group resources in the ICM may not maintain the financial health of all subsidiaries in the bank group, which can prove to be incompatible with the financial stability goals of the regulators in the countries where those subsidiaries conduct their business.
Within this context, the dissertation argues that the current EU resolution regime does not clearly address issues of double leverage when setting out capital and other liability requirements, i.e. the ‘Total Loss Absorbing Capacity’ (TLAC) and ‘Minimum Requirement for Eligible Liabilities’ (MREL) requirements. Moreover, the dissertation emphasis that it is equally relevant to clarify the way in which the bank group resources are available ahead of, and in financial distress. It is argued that to this end, bank groups need to be allowed to make use of the ICM as it is often uncertain what may be the cause of the financial distress and how the resources of the bank group could be used to stabilise it. To this end, the dissertation highlights that there is lack of clarity in both the ex-ante provisions on intra-group support framework and in the ex-post provisions governing the allocation of any surplus TLAC/MREL resources.
Besides the ‘intra-group’ issues within the bank group, the third point the dissertation makes relation to the bank group’s presence in multiple jurisdictions. This transnational element adds to the complexity of the intra-group issues resulting from sub-optimal cooperation between home and host authorities. In this regard, the dissertation underlines that the current framework could adopt a more balanced way in which the regulatory fora will take into account the interest of the authorities of all parts of the bank group.
Disagreement among philosophers over the proper justification for political institutions is far from a new phenomenon. Thus, it should not come as a surprise that there is substantial room for dissent on this matter within democratic theory. As is well known, instrumentalism and proceduralism represent the two primary viewpoints that democrats can adopt to vindicate democratic legitimacy. While the former notoriously derives the value of democracy from its outcomes, the latter claims that a democratic decision-making process is inherently valuable. This article has two aims. First, it introduces three variables with which we can thoroughly categorise the aforementioned approaches. Second, it argues that the more promising version of proceduralism is extrinsic, rather than intrinsic, and that extrinsically procedural accounts can appeal to other values in the justification of democracy without translating into instrumentalism. This article is organised as follows. I present what I consider to be the ‘implicit view’ in the justification of democracy. Then, I analyse each of the three variables in a different section. Finally, I raise an objection against procedural views grounded in relational equality, which cannot account for the idea that democracy is a necessary condition for political legitimacy.
Background: Decedents who are repatriated to Germany from abroad are not systematically registered nationwide. In Hamburg, in addition to an epidemic hygienic examination, registration and examination of the content of the documents accompanying the corpses of German citizens has been carried out since 2007. In this way, unclear and non-natural deaths in particular are to be followed up as necessary.
Material and methods: Protocols of external and internal autopsies of German nationals who died abroad and were repatriated to Hamburg via the port or airport between 2007 and 2018 were retrospectively evaluated with respect to numbers, completeness of the autopsy abroad and correctness of manner and cause of death.
Results: Between 2007 and 2018 a total of 703 corpses were repatriated via the port or airport of Hamburg and examined by the Port Medical Service for epidemic hygiene and for anything conspicuous in the documents accompanying the corpse. Of them, 307 corpses were examined at the Institute of Legal Medicine at the University Medical Center Hamburg-Eppendorf. In total, 82.4% of the examined cases had an incorrect, unspecific or incomplete foreign death certificate. Of the deceased, 238 were subjected to a second external autopsy by a forensic pathologist and 69 deceased were autopsied again or for the first time in Hamburg. It was found that 84% of the autopsies performed abroad were not performed according to German and European standards. The most common discrepancy was incomplete preparation of the organs. In almost one quarter of the autopsies performed in Hamburg a different cause of death than abroad was determined at autopsy.
Conclusion: Since the quality of autopsies performed abroad sometimes does not meet the standards in Germany and Europe and many papers accompanying corpses are incomplete or incorrectly filled out, a systematic review procedure in the home country is recommended. Through the system established in Hamburg in 2007, at least a re-evaluation of the cases takes place.
Cryptocurrencies provide a unique opportunity to identify how derivatives impact spot markets. They are fully fungible, trade across multiple spot exchanges at different prices, and futures contracts were selectively introduced on bitcoin (BTC) exchange rates against the USD in December 2017. Following the futures introduction, we find a significantly greater increase in cross-exchange price synchronicity for BTC--USD relative to other exchange rate pairs, as demonstrated by an increase in price correlations and a reduction in arbitrage opportunities and volatility. We also find support for an increase in price efficiency, market quality, and liquidity. The evidence suggests that futures contracts allowed investors to circumvent trading frictions associated with short sale constraints, arbitrage risk associated with block confirmation time, and market segmentation. Overall, our analysis supports the view that the introduction of BTC--USD futures was beneficial to the bitcoin spot market by making the underlying prices more informative.
he ECB is independent, but it is also accountable to the European parliament (EP). Yet, how the EP has held the ECB accountable has largely been overlooked. This paper starts addressing this gap by providing descriptive statistics of three accountability modalities. The paper highlights three findings. First, topics of accountability have changed. Climate-related accountability has increased quickly and dramatically since 2017. Second, if the relationship between price stability and climate change remains an object of conflict among MEPs, a majority within the EP has emerged to put pressure for the ECB to take a more active stance against climate change, precisely on behalf of its price stability mandate. Third, MEPs engage with the climate topic in very specific ways. There is a gender divide between the climate and the price stability topics. Women engage more actively with climate-related topics. While the Greens heavily dominate the climate topic, parties from the Right dominate the topic of Price stability. Finally, MEPs adopt a more united strategy and a particularly low confrontational tone in their climate-related interventions.
Global consensus is growing on the contribution that corporations and finance must make towards the net-zero transition in line with the Paris Agreement goals. However, most efforts in legislative instruments as well as shareholder or stakeholder initiatives have ultimately focused on public companies.
This article argues that such a focus falls short of providing a comprehensive approach to the problem of climate change. In doing so, it examines the contribution of private companies to climate change, the relevance of climate risks for them, as well as the phenomenon of brown-spinning (ie, the practice of public companies selling their highly polluting assets to private companies). We show that one cannot afford to ignore private companies in the net-zero transition and climate change adaptation. Yet, private companies lack several disciplining mechanisms that are available to public companies, such as institutional investor engagement, certain corporate governance arrangements, and transparency through regular disclosure obligations. At this stage, only some generic regulatory instruments such as carbon pricing and environmental regulation apply to them.
The article closes with a discussion of the main policy implications. Primarily, we discuss and evaluate the recent push to extend climate-related disclosure requirements to private companies. These disclosures would not only help investors by addressing information asymmetry, but also serve a wide group of stakeholders and thus aim at promoting a transition to a greener economy.
We provide the first comprehensive analysis of option information for pricing the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that certain option measures have significant predictive power, even after controlling for firm characteristics, earning a Fama-French three-factor alpha in excess of 20% per annum. Our analysis further reveals that the strongest option characteristics are associated with information about asset mispricing and future tail return realizations. Our findings are consistent with models of informed trading and limits to arbitrage.
The transition to a sustainable economy currently involves a fundamental transformation of our capital markets. Lawmakers, in an attempt to overcome this challenge, frequently seek to prescribe and regulate how firms may address environmental, social, and governance (ESG) concerns by formulating conduct standards. Deviating from this conceptual starting point, the present paper makes the case for another path towards achieving greater sustainability in capital markets, namely through the empowerment of investors.
This trust in the market itself is grounded in various recent developments both on the supply side and the demand side of financial markets, and also in the increasing tendency of institutional investors to engage in common ownership. The need to build coalitions among different types of asset managers or institutional investors, and to convince fellow investors of a given initiative, can then act as an in-built filter helping to overcome the pursuit of idiosyncratic motives and supporting only those campaigns that are seconded by a majority of investors. In particular, institutionalized investor platforms have emerged over recent years as a force for investor empowerment, serving to coordinate investor campaigns and to share the costs of engagement.
ESG engagement has the potential to become a very powerful driver towards a more sustainability-oriented future. Indeed, I show that investor-led sustainability has many advantages compared to a more prescriptive, regulatory approach where legislatures are in the driver’s seat. For example, a focus on investor-led priorities would follow a more flexible and dynamic pattern rather than complying with inflexible pre-defined criteria. Moreover, investor-promoted assessments are not likely to impair welfare creation in the same way as ill-defined legal standards; they will also not trigger regulatory arbitrage and would avoid deadlock situations in corporate decision-making. Any regulatory activity should then be limited to a facilitative and supportive role.
This paper studies the interactions between corporate law and VC exits by acquisitions, an increasingly common source of VC-related litigation. We find that transactions by VC funds under liquidity pressure are characterized by (i) a substantially lower sale price; (ii) a greater probability of industry outsiders as acquirers; (iii) a positive abnormal return for acquirers. These features indicate the existence of fire sales, which satisfy VCs' liquidation preferences but hurt common shareholders, leaving board members with conflicting fiduciary duties and litigation risks. Exploiting an important court ruling that establishes the board’s fiduciary duties to common shareholders as a priority, we find that after the ruling maturing VCs become less likely to exit by fire sales and they distribute cash to their investors less timely. However, VCs experience more difficult fundraising ex-ante, highlighting the potential cost of a common-favoring regime. Overall the evidence has important implications for optimal fiduciary duty design in VC-backed start-ups.
We estimate the cost of cultural biases in high-stake economic decisions by comparing agents’ peer-to-peer lending choices with those the same agents make under the assistance of an automated robo-advisor. We first confirm substantial in-group vs. out-group and stereotypical discrimination, which are stronger for lenders who reside where historical cultural biases are higher. We then exploit our unique setting to document that cultural biases are costly: agents face 8% higher default rates on favored-group borrowers when unassisted. The returns they earn on favored groups increase by 7.3 percentage points when assisted. The high riskiness of the marginal borrowers from favorite groups largely explains the bad performance of culturally-biased choices. Because varying economic incentives do not reduce agents’ biases, inaccurate statistical discrimination—unconscious biased beliefs about borrowers’ quality—can explain our results better than taste-based discrimination.
The European Central Bank (ECB) recently proclaimed a more active role for itself in the fight against climate change. Did the European Parliament (EP) play a part in this regard, and if so what was it? To answer this question, this paper builds on a multi-method text analysis of original datasets compiling communications between the ECB and the EP across three accountability forums between 2014 and 2021. The paper shows that there has been discursive convergence between central bankers and parliamentarians concerning the role of the ECB in combatting climate change. It argues that this convergence has resulted from a pragmatic (yet precarious) adoption of a common repertoire1 between ‘green’ central bankers and parliamentarians who have favored a more active role for the ECB in the fight against climate change. The adoption of a common repertoire is pragmatic, in that it results from the strategic use of specific discursive elements that are ambitious enough to address their respective opponents and trigger political change, yet vague enough to allow both sets of actors to converge on them momentarily. It is also precarious in the sense that it involves discarding fundamental political tensions, which is hardly tenable in the long term. The paper shows that both organizational and politicization dynamics have been at work in the emergence of this pragmatic yet precarious bedfellowship between ‘green’ central bankers and parliamentarians.
Trust between parties should drive contract design: if parties were suspicious about each others’ reaction to unplanned events, they might agree to pay higher costs of negotiation ex ante to complete contracts. Using a unique sample of U.S. consulting contracts and a negative shock to trust between shareholders/managers (principals) and consultants (agents) staggered across space and over time, we find that lower trust increases contract completeness. Not only the complexity but also the verifiable states of the world covered by contracts increase after trust drops. The results hold for several novel text-analysis-based measures of contract completeness and do not arise in falsification tests. At the clause level, we find that non-compete agreements, confidentiality, indemnification, and termination rules are the most likely clauses added to contracts after a negative shock to trust and these additions are not driven by new boilerplate contract templates. These clauses are those whose presence should be sensitive to the mutual trust between principals and agents.
This paper analyses disclosure duties in insurance contract law in Germany on the basis of questions developed in preparation of the World Congress of the International Insurance Law Association (AIDA) 2018. As risk factors are within the policyholder’s sphere of knowledge, the insurer naturally depends on gaining such knowledge from its policyholder in order to calculate and evaluate premium and risk. Legal approaches as to how the insurer may obtain relevant information and the legal consequences differ in national insurance contract laws around the globe. Taking part in this legal comparison, the paper describes the key elements of such a mechanism from a German perspective and comprises both duties of the policyholder and duties of the insurer.
As for the policyholder, these issues are differences between a duty to (spontaneously) disclose and a duty not to misrepresent as a reaction to questions of the insurer, the prerequisites and remedies of such duty, the subjective standard of the disclosure duty and a duty to notify material changes during the contract term. On the other hand, the paper also addresses an insurer’s duty to investigate, a duty to ascertain the policyholder’s understanding of the policy and a duty to inform during the contract term or after the occurrence of an insured event. In doing so, the paper offers a comprehensive and critical overview on the transfer of knowledge in the insurance (pre-)contractual relationship.
This paper considers ways in which rulers can respond to, generate, or exploit fear of COVID-19 infection for various ends, and in particular distinguishes between ‘fear-invoking’ and ‘fear-minimising’ strategies. It examines historical precedent for executive overreach in crises and then moves on to look in more detail at some specific areas where fear is being mobilised or generated: in ways that lead to the suspension of civil liberties; that foster discrimination against minorities; and that boost the personality cult of leaders and limit criticism or competition. Finally, in the Appendix, we present empirical work, based on the results of an original survey in Brazil, that provides support for the conjectures in the previous sections. While it is too early to tell what the longer-term outcomes of the changes we note will be, our purpose here is simply to identify some warning signs that threaten the key institutions and values of democracy.
The COVID-19 pandemic has both highlighted and exacerbated global health inequities, leading for calls for responses to COVID to promote social justice and ensure that no one is left behind. One key lesson to be learnt from the pandemic is the critical importance of decolonizing global health and global health research so that African countries are better placed to address pandemic challenges in contextually relevant ways. This paper argues that to be successful, programmes of decolonization in complex global health landscapes require a complex three-dimensional approach. Drawing on the broader discourse of political decolonization that has been going on in the African context for over a century, we present a model for unpacking the complex task of decolonization. Our approach suggests a three-dimensional approach which encompasses hegemomic; epistemic; and commitmental elements.
We live in tragic times. Millions are sheltering in place to avoid exacerbating the Coronavirus (COVID-19) pandemic. How should we respond to such tragedies? This paper argues that the human right to health can help us do so because it inspires human rights advocates, claimants, and those with responsibility for fulfilling the right to try hard to satisfy its claims. That is, the right should, and often does, give rise to what I call the virtue of creative resolve. This resolve embodies a fundamental commitment to finding creative solutions to what appear to be tragic dilemmas. Contra critics, we should not reject the right even if it cannot tell us how to ration scarce health resources. Rather, the right gives us a response to apparent tragedy in motivating us to search for ways of fulfilling everyone’s basic health needs.
The COVID-19 pandemic is affecting countries across the globe. Only a globally coordinated response, however, will enable the containment of the virus. Responding to a request from policy makers for ethics input for a global resource pledging event as a starting point, this paper outlines normative and procedural principles to inform a coordinated global coronavirus response. Highlighting global connections and specific vulnerabilities from the pandemic, and proposing standards for reasonable and accountable decision-making, the ambition of the paper is two-fold: to raise awareness for the justice dimensions in the global response, and to argue for moving health from the periphery to the centre of philosophical debates about social and global justice.
The first case of COVID-19 infection in Africa was recorded in Egypt on 14 February 2020. Following this, several projections of the possible devastating effect that the virus can have on the population of African countries were made in the Western media. This paper presents evidence for Africa’s successful responses to the COVID-19 pandemic and under-reporting or misrepresentation of these successes in Western media. It proceeds to argue for accounting for these successes in terms of Africa’s communitarian way of life and conceptions of self, duty, and rights; and that a particular orientation in theorizing on global justice can highlight the injustices inherent in the misrepresentation of these successes and contribute shared perspectives to formulating a framework of values and concepts that would facilitate the implementation of global policy goals for justice. The paper is thus grounded in a rejection of the insular tenets of theorizing prevalent in the global justice debate and to persistent inclinations in Western scholarship to the thinking that theorizing in the African context that draws inspiration from the cultural past has little to contribute to the quest for justice globally. On the contrary, it argues that reflexive critique of cultural history is a necessary source of normative ideals that can foster tolerant coexistence and a cooperative endeavour toward shared conceptions of justice in the contemporary world.
Introduction
(2022)
The health and genetic data of deceased people are a particularly important asset in the field of biomedical research. However, in practice, using them is compli- cated, as the legal framework that should regulate their use has not been fully developed yet. The General Data Protection Regulation (GDPR) is not applicable to such data and the Member States have not been able to agree on an alternative regulation. Recently, normative models have been proposed in an attempt to face this issue. The most well- known of these is posthumous medical data donation (PMDD). This proposal supports an opt-in donation system of health data for research purposes. In this article, we argue that PMDD is not a useful model for addressing the issue at hand, as it does not consider that some of these data (the genetic data) may be the personal data of the living relatives of the deceased. Furthermore, we find the reasons supporting an opt-in model less convincing than those that vouch for alternative systems. Indeed, we propose a normative framework that is based on the opt-out system for non-personal data combined with the application of the GDPR to the relatives’ personal data.
Large companies are increasingly on trial. Over the last decade, many of the world’s biggest firms have been embroiled in legal disputes over corruption charges, financial fraud, environmental damage, taxation issues or sanction violations, ending in convictions or settlements of record-breaking fines, well above the billion-dollar mark. For critics of globalization, this turn towards corporate accountability is a welcome sea-change showing that multinational companies are no longer above the law. For legal experts, the trend is noteworthy because of the extraterritorial dimensions of law enforcement, as companies are increasingly held accountable for activities independent of their nationality or the place of the activities. Indeed, the global trend required understanding the evolution of corporate criminal law enforcement in the United States in particular, where authorities have skillfully expanded its effective jurisdiction beyond its territory. This paper traces the evolution of corporate prosecutions in the United States. Analyzing federal prosecution data, it then shows that foreign firms are more likely to pay a fine, which is on average 6,6 times larger.
China’s law to control international non-governmental organisations (INGOs) has sent shockwaves through international non-governmental organisations (NGOs), civil society and expert communities as the epitome of a worldwide trend of closing civic spaces. Since the Overseas NGO Management Law was enacted in January 2017, its implementation has seen mixed effects and diverging patterns of adaptation among Chinese party-state actors at the central and local levels and among domestic NGOs and INGOs. To capture the formal and informal dynamics underlying their mutual interactions in the longer term, this article employs a theory of institutional change inspired by Elinor Ostrom’s distinction between rules-in-form versus rules-in-use and identifies four scenarios for international civil society in China – “no change,” “restraining,” “recalibrating” and “reorienting.” Based on interviews, participant observation and Chinese policy documents and secondary literature, the respective driving forces, plausibility, likelihood and longer-term implications of each scenario are assessed. It is found that INGOs’ activities are increasingly affected by the international ambitions of the Chinese party-state, which enmeshes both domestic NGOs and INGOs as agents in its diplomatic efforts to redefine civil society participation on a global scale.
Global consensus is growing on the contribution that corporations and finance must make towards the net-zero transition in line with the Paris Agreement goals. However, most efforts in legislative instruments as well as shareholder or stakeholder initiatives have ultimately focused on public companies: for example, most disclosure obligations result from the given company’s status of being listed on a stock exchange.
This article argues that such a focus falls short of providing a comprehensive approach to the problem of climate change. In doing so, it examines the contribution of private companies to climate change, the relevance of climate risks for them, as well as the phenomenon of brown-spinning. We show that one cannot afford to ignore private companies in the net-zero transition and climate change adaptation. Yet, private companies lack several disciplining mechanisms available to public companies such as institutional investor engagement, certain corporate governance arrangements, and transparency through regular disclosure obligations. At this stage, only some generic regulatory instruments such as carbon pricing and environmental regulation apply to them. The article closes with a discussion of the main policy implications. Primarily, we propose extending sustainability disclosure requirements to private companies.
Sustainability disclosures aim at promoting a transition to a greener economy, rather than (only) protecting investors by addressing information asymmetry. Therefore, these disclosures should encompass private companies that are of relevance for the net-zero transition. Such disclosures can be a powerful tool in shedding light on the polluting private companies that have so far been in the dark as well as serving as a disciplining mechanism.
In ‘Justice and Natural Resources,’ Chris Armstrong offers a rich and sophisticated egalitarian theory of resource justice, according to which the benefits and burdens flowing from natural (and non-natural) resources are ideally distributed with a view to equalize people’s access to wellbeing, unless there are compelling reasons that justify departures from that egalitarian default. Armstrong discusses two such reasons: special claims from ‘improvement’ and ‘attachment.’ In this paper, I critically assess the account he gives of these potential constraints on global equality. I argue that his recognition of them has implications that Armstrong does not anticipate, and which challenge some important theses in his book. First, special claims from improvement will justify larger departures from the egalitarian default than Armstrong believes. Second, a consistent application of Armstrong’s life planfoundation for special claims from attachment implies that nation-states may move closer to justify ‘permanent sovereignty’ over the resources within their territories than what his analysis suggests.
In this paper, we discuss Armstrong’s account of attachment-based claims to natural resources, the kind of rights that follow from attachment-based claims, and the limits we should impose on such claims. We hope to clarify how and why attachment matters in the discourse on resource rights by presenting three challenges to Armstrong’s theory. First, we question the normative basis for certain attachment claims, by trying to distinguish more clearly between different kinds of attachment and other kinds of claims. Second, we highlight the need to supplement Armstrong’s account with a theory of how to weigh different attachment claims so as to establish the normative standing that different kinds of attachment claims should have. Third, we propose that sustainability must be a necessary requirement for making attachment claims to natural resources legitimate. Based on these three challenges and the solutions we propose, we argue that attachment claims are on the one hand narrower than Armstrong suggests, while on the other hand they can justify more far-reaching rights to control than Armstrong initially considers, because of the particular weight that certain attachment claims have.
The paper analyses the interrelationship between Armstrong’s egalitarian theory and his treatment of the ‘attachment theory’ of resources, which is the dominant rival theory of resources that his theory is pitched against. On Armstrong’s theory, egalitarianism operates as a default position, from which special claims would need to be justified, but he also claims to be able to incorporate ‘attachment’ into his theory. The general question explored in the paper is the extent to which ‘attachment’ claims can be ‘married’ to an egalitarian theory. The more specific argument is that a properly constrained attachment theory is more plausible than Armstrong’s egalitarian theory. Armstrong’s paper also criticizes attachment and improvement accounts as justifying permanent sovereignty over resources. This paper argues that neither of those arguments aim to justify the international doctrine of permanent sovereignty.
This paper argues that land and resource rights are often essential in overcoming colonial inequality and devaluation of indigenous populations and cultures. It thereby criticizes global welfare egalitarians that promote the abolition of national sovereignty over resources in the name of increased equality. The paper discusses two ways in which land and resource rights contribute to decolonization and the eradication of the associated inequality. First, it proposes that land and resource rights have acquired a status-conferring function for (formerly) colonized peoples so that possession of full personhood and relational equality is partially expressed through the possession of land and resource rights. Second, it suggests that successful internal decolonization depends on access to and control over land and resources, especially for indigenous peoples.
In Justice and Natural Resources: An Egalitarian Theory (2017), Chris Armstrong proposes a version of global egalitarianism that – contra the default renderings of this approach – takes individual attachment to specific resources into account. By doing this, his theory has the potential for greening global egalitarianism both in terms of procedure and scope. In terms of procedure, its broad account of attachment and its focus on individuals rather than groups connects with participatory governance and management and, ultimately, participatory democracy – an essential ingredient in the toolkit of green politics and policy-making. In terms of scope, because it does not commit itself to any particular moral framework, Armstrong’s theory leaves the door open for non-human animals to become subjects of justice, thus extending the realm of the latter beyond its traditionally anthropocentric borders. I conclude that these greenings are promising, but not trouble-free.
A reply to my critics
(2021)
It is a real pleasure to reply to so many thoughtful and probing responses to my book. In what follows, I will focus on six key themes that emerge across the various pieces. Some of them call into question core commitments of my theory, and in those cases I will try to show what might be said in its defence. Quite a number of the critics, however, present what we might call expansionist arguments: though they endorse some of the arguments I make, that is – or pick up some of its key concepts – they seek to push them in new and interesting directions. I will suggest that many of those arguments look likely to be successful, though I will also express caution about one or two of them. I doubt, however, that I will be the final judge of their success. Early on in the book I express the hope that it might provide a set of conceptual tools capable of advancing discussions about resource justice more broadly, even for scholars who reject my own idiosyncratic approach. Having made that gambit, I cannot now claim to have a monopoly on the use of the tools in question. Witnessing the use that others have already made of them has been a refreshing and rewarding experience.
This paper uses a novel account of non-ideal political action that can justify radical responses to severe climate injustice, including and especially deliberate attempts to engineer the climate system in order reflect sunlight into space and cooling the planet. In particular, it discusses the question of what those suffering from climate injustice may do in order to secure their fundamental rights and interests in the face of severe climate change impacts. Using the example of risky geoengineering strategies such as sulfate aerosol injections, I argue that peoples that are innocently subject to severely negative climate change impacts may have a special permission to engage in large-scale yet risky climate interventions to prevent them. Furthermore, this can be true even if those interventions wrongly harm innocent people.
Chris Armstrong argues that attempts at justifying special claims over natural resources generally take one of two forms: arguments from improvement and arguments from attachment. We argue that Armstrong fails to establish that the distinction between natural resources and improved resources has no normative significance. He succeeds only in showing that ‘improvers’ (whoever they may be) are not necessarily entitled to the full exchange value of the improvement. It can still be argued that the value of natural and improved resources should be distributed on different grounds, but that the value of improvements should be conceived differently.
This paper argues first that Armstrong is led to see natural resources primarily as objects of consumption. But many natural resources are better seen as objects of enjoyment, where one person’s access to a resource need not prevent others from enjoying equal access, or as objects of production, where granting control of a resource to one person may produce collateral benefits to others. Second, Armstrong’s approach to resource distribution, which requires that everyone must have equal access to welfare, conceals an ambiguity as to whether this means equal opportunity for welfare, or simply equal welfare – the underlying issue being how far individuals (or countries) should be held responsible for the use they make of the resources they are allocated. Third, when Armstrong attacks arguments that appeal to ‘improvement’ as a basis for claims to natural resources, he treats them as making comparative desert claims: if country A makes a claim to the improved resources on its territory, it must show that their comparative value accurately reflects the productive deserts of its members compared to those of countries B. But in fact, A needs only to make the much weaker claim that its members have done more than others to enhance the value of its resources. Overall, Armstrong’s welfarist approach fails to appreciate the dynamic advantages of allocating resources to those best able to use them productively.
Introduction
(2021)
Prospective welfare analysis - extending willingness-to-pay assessment to embrace sustainability
(2022)
In this paper we outline how a future change in consumers’ willingness-to-pay can be accounted for in a consumer welfare effects analysis in antitrust. Key to our solution is the prediction of preferences of new consumers and changing preferences of existing consumers in the future. The dimension of time is inextricably linked with that of sustainability. Taking into account the welfare of future cohorts of consumers, concerns for sustainability can therefore be integrated into the consumer welfare paradigm to a greater extent. As we argue in this paper, it is expedient to consider changes in consumers’ willingness-to-pay, in particular if society undergoes profound changes in such preferences, e.g., caused by an increase in generally available information on environmental effects of consumption, and a rising societal awareness about how consumption can have irreversible impacts on the environment. We offer suggestions on how to conceptionalize and operationalize the projection of such consumers’ changing preferences in a “prospective welfare analysis”. This increases the scope of the consumer welfare paradigm and can help to solve conceptual issues regarding the integration of sustainability into antitrust enforcement while keeping consumer surplus as a quantitative gauge.
Using granular supervisory data from Germany, we investigate the impact of unconventional monetary policies via central banks’ purchase of corporate bonds. While this policy results in a loosening of credit market conditions as intended by policy makers, we document two unintended side effects. First, banks that are more exposed to borrowers benefiting from the bond purchases now lend more to high-risk firms with no access to bond markets. Since more loan write-offs arise from these firms and banks are not compensated for this risk by higher interest rates, we document a drop in bank profitability. Second, the policy impacts the allocation of loans among industries. Affected banks reallocate loans from investment grade firms active on bond markets to mainly real estate firms without investment grade rating. Overall, our findings suggest that central banks’ quantitative easing via the corporate bond markets has the potential to contribute to both banking sector instability and real estate bubbles.
Since the 2008 financial crisis, European largest banks’ size and business models have largely remained unchallenged. Is that because of banks’ continued structural power over States? This paper challenges the view that States are sheer hostages of banks’ capacity to provide credit to the real economy – which is the conventional definition of structural power. Instead, it sheds light on the geo-economic dimension of banks’ power: key public officials conceive the position of “their own” market-based banks in global financial markets as a crucial dimension of State power. State priority towards banking thus result from political choices over what structurally matters the most for the State. Based on a discourse analysis of parliamentary debates in France, Germany and Spain between 2010 and 2020 as well as on a comparative analysis of the implementation of a special tax on banks in the early 2010s, this paper shows that State’s Finance ministries tend to prioritize geo-economic considerations over credit to firms. By contrast, Parliaments tend to prioritize investment. Power dynamics within the State thus largely shape political priorities towards banking at the domestic and international levels.
Criminal law exceptionalism, or so I suggest, has turned into an ideology in German and Continental criminal law theory. It rests on interrelated claims about the (ideal or real) extraordinary qualities and properties of the criminal law and has led to exceptional doctrines in constitutional criminal law and criminal law theory. It prima facie paradoxically perpetuates and conserves the criminal law, and all too often leads to ideological thoughtlessness, which may blind us to the dark sides of criminal laws in action.
Both China and the EU have nearly 30 years of legislative experience on GMOs. However, despite all the experience gained so far and theoretical analyses, due to the social concerns about GMO risk, both China and Germany are still encountering a decision-making dilemma on authorizing green GMOs. Therefore, the dissertation is dedicated to the issue of whether there is a possibility that this dilemma could be resolved by improving or reformulating the administrative risk decision-making mechanism regarding green GMOs. Specifically, the dissertation analyses four concrete questions: operation of classical decision-making on danger prevention, the challenges posed by uncertain risks, the theoretical legal response to uncertain risk, and the functioning of legally constituted decision-making mechanisms for GMOs in Germany/ the EU and China.
Conventionally, danger is a threshold for the executive to intervene in individual liberty. It can ensure the rationality of ex-ante intervention and further guarantee a balance between individual liberty and public safety. Regarding the danger prevention decision-making process, the executive authorities investigate the factual information at first; then, based on reliable and accessible common knowledge about the rule of causality, predict the degree of possible damage and the occurrence probability; at last, make ex-ante intervention decisions to interrupt the causality chain and avoid damages.
In the risk society, uncertain risk of GMOs is characterized as collectively wide-ranging, manufactured, high-technological, and value-oriented. The ex-ante intervention of the administration extends from danger to uncertain risk, i.e., risk precaution. The essential cause of uncertain risk is that humans do not have sufficient knowledge and have not yet grasped the rule of causality regarding new technologies. Due to the lack of a cognitive reference standard, it is not easy for the administration to judge the existence of risks and make rational decisions on risk precaution, which, consequently, amounts to losing the balance between individual freedom and public safety. Besides, if the authority makes a decision ad arbitrium, and expects learning by error, this may cause significant secondary risks.
In the risk management system, there are two primary, partly interrelated strategies to manage risk that are currently used: that is, knowledge generation and proceduralization. Specifically, to de-materialize the legislation, integrate multipartite participation in the decision-making process, and open the procedure for updating the information can contribute to the generation of the requisite knowledge. Proceduralization can assist with knowledge generation, promote the reconciliation of conflicting interests, compensate for material and legal deficits, and control the legitimacy of administrative behavior.
In the final chapter, the laws on GMOs in the EU, Germany, and China are analysed, especially under the perspective of the concrete risk decision-making mechanisms.
Overall, this dissertation argues that law can procedurally guarantee the independence and reliability of experts and ensure that access to public participation is open. But what the law can do to address public trust and scientifically uncertain risks, is limited.
This article examines whether restrictions on access to welfare rights for EU immigrants are justifiable on grounds of reciprocity. Recently political theorists have supported some robust restrictions on the basis of fairness. They argue that if EU immigrants do not immediately contribute sufficiently to the provision of basic collective goods in the host state, restrictions on their access to the welfare state are justified. I argue that these accounts of the principle of reciprocity rely on an ambiguous conception of contribution that cannot deliver the restrictions it advocates. Several strategies open to those advocating reciprocity-based restrictions are considered and found wanting. This article defends that verdict from a number of objections.
Using loan-level data from Germany, we investigate how the introduction of model-based capital regulation affected banks’ ability to absorb shocks. The objective of this regulation was to enhance financial stability by making capital requirements responsive to asset risk. Our evidence suggests that banks ‘optimized’ model-based regulation to lower their capital requirements. Banks systematically underreported risk, with under reporting being more pronounced for banks with higher gains from it. Moreover, large banks benefitted from the regulation at the expense of smaller banks. Overall, our results suggest that sophisticated rules may have undesired effects if strategic misbehavior is difficult to detect.
In this study, we analyze the trading behavior of banks with lending relationships. We combine detailed German data on banks’ proprietary trading and market making with lending information from the credit register and then examine how banks trade stocks of their borrowers around important corporate events. We find that banks trade more frequently and also profitably ahead of events when they are the main lender (or relationship bank) for the borrower. Specifically, we show that relationship banks are more likely to build up positive (negative) trading positions in the two weeks before positive (negative) news events, and also that they unwind these positions shortly after the event. This trading pattern is more pronounced for unscheduled earnings events, M&A transactions, and after borrower obtain new bank loans. Our results suggest that lending relationships endow banks with important information, highlighting the potential for conflicts of interest in banking, which has been a prominent concern in the regulatory debate.
Increasing the diversity of policy committees has taken center stage worldwide, but whether and why diverse committees are more effective is still unclear. In a randomized control trial that varies the salience of female and minority representation on the Federal Reserve’s monetary policy committee, the FOMC, we test whether diversity affects how Fed information influences consumers’ subjective beliefs. Women and Black respondents form unemployment expectations more in line with FOMC forecasts and trust the Fed more after this intervention. Women are also more likely to acquire Fed-related information when associated with a female official. White men, who are overrepresented on the FOMC, do not react negatively. Heterogeneous taste for diversity can explain these patterns better than homophily. Our results suggest more diverse policy committees are better able to reach underrepresented groups without inducing negative reactions by others, thereby enhancing the effectiveness of policy communication and public trust in the institution.
We identify strong cross-border institutions as a driver for the globalization of in-novation. Using 67 million patents from over 100 patent offices, we introduce novel measures of innovation diffusion and collaboration. Exploiting staggered bilateral in-vestment treaties as shocks to cross-border property rights and contract enforcement, we show that signatory countries increase technology adoption and sourcing from each other. They also increase R&D collaborations. These interactions result in techno-logical convergence. The effects are particularly strong for process innovation, and for countries that are technological laggards or have weak domestic institutions. Increased inter-firm rather than intra-firm foreign investment is the key channel.
Using hand-collected data on CEO appointments during shareholder activism campaigns, this study examines whether shareholder involvement in CEO recruiting affects frictions in CEO hiring decisions. The results indicate that appointments of CEOs who are recruited with shareholder activist influence are followed by more favorable stock market reactions and stronger profitability improvements than CEO appointments that also occur during activism campaigns but without the influence of activists. I find little evidence that shareholder activists increase hiring frictions by facilitating the recruiting of CEOs who will implement myopic corporate policies. Analyses of recruiting process characteristics reveal that activist influence is associated with more resources being dedicated to the CEO search process and with a higher propensity to recruit CEOs from outside the firm. These findings contribute to the CEO labor market literature, which tends to focus on the decision to remove incumbent CEOs but provides limited insights into CEO recruiting.
This paper argues that the key mechanisms protecting retail investors’ financial stake in their portfolio investments are indirect. They do not rely on actions by the investors or by any private actor directly charged with looking after investors’ interests. Rather, they are provided by the ecosystem that investors (are legally forced to) inhabit, as a byproduct of the mostly self-interested, mutually and legally constrained behavior of third parties without a mandate to help the investors (e.g., speculators, activists). This elucidates key rules, resolves the mandatory vs. enabling tension in corporate/securities law, and exposes passive investing’s fragile reliance on others’ trading.
Do required minimum distribution 401(k) rules matter, and for whom? Insights from a lifecylce model
(2021)
Tax-qualified vehicles helped U.S. private-sector workers accumulate $25Tr in retirement assets. An often-overlooked important institutional feature shaping decumulations from these retirement plans is the “Required Minimum Distribution” (RMD) regulation, requiring retirees to withdraw a minimum fraction from their retirement accounts or pay excise taxes on withdrawal shortfalls. Our calibrated lifecycle model measures the impact of RMD rules on financial behavior of heterogeneous households during their worklives and retirement. We show that proposed reforms to delay or eliminate the RMD rules should have little effects on consumption profiles but more impact on withdrawals and tax payments for households with bequest motives.
Expectations about economic variables vary systematically across genders. In the domain of inflation, women have persistently higher expectations than men. We argue that traditional gender roles are a significant factor in generating this gender expectations gap as they expose women and men to different economic signals in their daily lives. Using unique data on the participation of men and women in household grocery chores, their resulting exposure to price signals, and their inflation expectations, we document a tight link between the gender expectations gap and the distribution of grocery shopping duties. Because grocery prices are highly volatile, and consumers focus disproportionally on positive price changes, frequent exposure to grocery prices increases perceptions of current inflation and expectations of future inflation. The gender expectations gap is largest in households whose female heads are solely responsible for grocery shopping, whereas no gap arises in households that split grocery chores equally between men and women. Our results indicate that gender differences in inflation expectations arise due to social conditioning rather than through differences in innate abilities, skills, or preferences.
This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods.
Our starting point is the following simple but potentially underappreciated observation: When assessing willingness to pay (WTP) for hedonic features of a product, the results of such measurement are influenced by the context in which the consumer makes her real or hypothetical choice or in which the questions to which she replies are set (such as in a contingent valuation analysis). This observation is of particular relevance when WTP regards sustainability, the “non-use value” of which does not derive from a direct (physical) sensation and where perceived benefits depend heavily on available information and deliberations. The recognition of such context sensitivity paves the way for a broader conception of consumer welfare (CW), and our proposed standard of “reflective WTP” may materially change the scope for private market initiatives with regards to sustainability, while keeping the analytical framework within the realm of the CW paradigm. In terms of practical implications, we argue, for instance, that actual purchasing decisions may prove insufficient to measure consumer appreciation of sustainability, as they may rather echo learnt but unreflected heuristics and may be subject to the specific shopping context, such as heavy price promotions. Also, while it may reflect current social norm, the latter may change considerably over time as more consumers adopt their behavior.
We present evidence on the way personal and institutional factors could together guide public company directors in decision-making concerning shareholders and stakeholders. In a sample comprising more than nine hundred directors originating from over fifty countries and serving in firms from twenty three countries, we confirm that directors around the world hold a principled, quasi-ideological stance towards shareholders and stakeholders, called shareholderism, on which they vary in line with their personal values. We theorize and find that in addition to personal values, directors’ shareholderism level associates with cultural norms that are conducive to entrepreneurship. Among legal factors, only creditor protection exhibits a negative correlation with shareholderism, while general legal origin and proxies for shareholder and employee protection are unrelated to it.
We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong – but not complete – tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks’ risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans.
This paper shows that judicial enforcement has substantial effects on firms’ decisions with regard to their employment policies. To establish causality, I exploit a reorganization of the court districts in Italy involving judicial district mergers as a shock to court productivity. I find that an improvement in enforcement, as measured by a reduction in average trial length, has a large, positive effect on firm employment. These effects are stronger in firms with high leverage, or that belong to industries more dependent on external finance and characterized by higher complementarity between labor and capital, consistent with a financing channel driving the results. Moreover, in presence of stronger enforcement, firms can raise more debt to dampen the impact of negative shocks and, in this way, reduce employment fluctuations.
We present novel evidence on the value of cross-border political access. We analyze data on meetings of US multinational enterprises (MNEs) with European Commission (EC) policymakers. Meetings with Commissioners are associated with positive abnormal equity returns. We study channels of value creation through political access in the areas of regulation and taxation. US enterprises with EC meetings are more likely to receive favorable outcomes in their European merger decisions and have lower effective tax rates on foreign income than their peers without meetings. Our results suggest that access to foreign policymakers is of substantial value for MNEs.
We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe’s regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.
Extant research shows that CEO characteristics affect earnings management. This paper studies how investors infer a specific characteristic of CEOs, namely moral commitment to honesty, from earnings management and how this perception – in conjunction with their own social and moral preferences – shapes their investment choices. We conduct two laboratory experiments simulating investment choices. Our results show that participants perceive a CEO to be more committed to honesty when they infer that the CEO engaged less in earnings management. For investment decisions, a one standard deviation increase in a CEO's perceived commitment to honesty compared to another CEO reduces the relevance of differences in the CEOs’ claimed future returns by 40%. This effect is most prominent among investors with a proself value orientation. To prosocial investors, their own honesty values and those attributed to the CEO matter directly, while returns play a secondary role. Overall, perceived CEO honesty matters to different investors for distinct reasons.
This paper documents that resource reallocation across firms is an important mechanism through which creditor rights affect real outcomes. I exploit the staggered adoption of an international convention that provides globally consistent strong creditor protection for aircraft finance. After this reform, country-level productivity in the aviation sector increases by 12%, driven mostly by across-firm reallocation. Productive airlines borrow more, expand, and adopt new technology at the expense of unproductive ones. Such reallocation is facilitated by (i) easier and quicker asset redeployment; and (ii) the influx of foreign financiers offering innovative financial products to improve credit allocative efficiency. I further document an increase in competition and an improvement in the breadth and the quality of products available to consumers.
In times of crisis, governments have strong incentives to influence banks’ credit allocation because the survival of the economy depends on it. How do governments make banks “play along”? This paper focuses on the state-guaranteed credit programs (SGCPs) that have been implemented in Europe to help firms survive the COVID 19 crisis. Governments’ capacity to save the economy depends on banks’ capacity to grant credit to struggling firms (which they would not be inclined to do spontaneously in the context of a global pandemic). All governments thus face the same challenge: How do they make sure that state guaranteed loans reach their desired target and on what terms? Based on a comparative analysis of the elaboration and implementation of SGCPs in France and Germany, this paper shows that historically-rooted institutionalized modes of coordination between state and bank actors have largely shaped the terms of the SGCPs in these two countries.