Law Commons^™

China's 'Corporatization Without Privatization' And The Late 19th Century Roots Of A Stubborn Path Dependency, Nicholas Howson

Articles

This Article analyzes the contemporary program of “corporatization without privatization” in the People's Republic of China (PRC) directed at China's traditional state-owned enterprises (SOEs) through a consideration of long ago precursor enterprise establishments--starting from the last Chinese imperial dynasty's creation of “government-promoted/-supervised, merchant-financed/-operated” (guandu shangban) firms in the latter part of the nineteenth century. While analysts are tempted to see the PRC corporations with listings on international exchanges that dominate the global economy and capital markets as expressions of “convergence,” this Article argues that such firms in fact show deeply embedded aspects of path dependency unique to the Chinese context …

Private Enforcement Of Company Law And Securities Regulation In Korea, Hwa-Jin Kim

Book Chapters

This chapter offers a brief overview of the private enforcement of corporate law and securities regulation in Korea, with particular reference to the current legislative efforts in the Korean National Assembly and recent court cases. This chapter also talks about Korea’s ill-fated and misguided adoption of the fraud-on-the-market theory in securities fraud litigation.

A Big Gap Between ‘Law In Books’ And ‘Law In Action’ And "A New Taxonomy Of Enforcement Strategies", Robin H. Huang, Nicholas C. Howson

Other Publications

Any attempt to comprehensively analyse the enforcement of corporate law and securities regulation is difficult, not only because there are so many distinct national systems in play, but also because, we need to examine both formal enforcement mechanisms and the way in which such mechanisms are applied in practice. If nothing else, the expert analyses presented in the foregoing chapters of this book confirm that with respect to enforcement issues a rather large gap does exist between what Roscoe Pound memorably called ‘law in books’ and ‘law in action’.

Multinational Firms And Tax Havens, Anna Gumpert, James R. Hines Jr., Monika Schnitzer

Articles

Multinational firms with operations in high-tax countries can benefit the most from reallocating taxable income to tax havens, though this is sufficiently difficult and costly that only 20.4% of German multinational firms have any tax haven affiliates. Among German manufacturing firms, a 1 percentage point higher foreign tax rate is associated with a 2.3% greater likelihood of owning a tax haven affiliate. This is consistent with tax avoidance incentives and contrasts with earlier evidence for U.S. firms. The relationship is less strong for firms in service industries, possibly reflecting the difficulty of reallocating taxable service income.

Protecting The State From Itself? Regulatory Interventions In Corporate Governance And The Financing Of China's 'State Capitalism', Nicholas C, Howson

Book Chapters

From the start of China’s “corporatization without privatization” process in the late 1980s, a Chinese corporate governance regime, apparently shareholder-empowering and determined by enabling legal norms, has been altered by mandatory governance mechanisms imposed by a state administrative agency, the China Securities Regulatory Commission (CSRC). This has been done to protect minority shareholders against exploitation by the Party-state controlling shareholders, the power behind China’s “state capitalism.” This chapter reviews the path of this benign intervention by the CSRC and the structural reasons for it, and then speculates on why this novel example of the China’s “fragmented authoritarianism” continues to be …

Insuring Floods: The Most Common And Devastating Natural Catastrophes In America, Christopher French

Journal Articles

Flooding is the most common natural catastrophe Americans face, accounting for 90% of all damage caused by natural catastrophes. Hurricanes Katrina and Sandy, for example, collectively caused over $160 billion in damage, but only approximately 10% of the Hurricane Katrina victims and 50% of the Hurricane Sandy victims had insurance to cover their flood losses. Consequently, both their homes and lives were left in ruins in the wake of the storms. Nationwide, only approximately 7% of homeowners have insurance that covers flood losses even though the risk of flooding is only increasing as coastal areas continue to be developed and …

Reverse Cross-Listings - The Coming Race To List In Emerging Markets And An Enhanced Understanding Of Classical Bonding, Nicholas C. Howson, Vikramaditya Khanna

Articles

Studies have found that when a U.S. issuer lists abroad on a foreign exchange, its shares exhibit negative abnormal returns. This negative movement may be because the market expects that the foreign listing will facilitate undetectable insider trading on the foreign exchange or other conduct impermissible in the United States.

'Quack Corporate Governance' As Traditional Chinese Medicine – The Securities Regulation Cannibalization Of China's Corporate Law And A State Regulator's Battle Against Party State Political Economic Power, Nicholas C. Howson

Articles

From the start of the People’s Republic of China’s (PRC) “corporatization ” project in the late 1980s, a Chinese corporate governance regime subject to increasingly enabling legal norms has been determined by mandatory regulations imposed by the PRC securities regulator, the China Securities Regulatory Commission (CSRC). Indeed, the Chinese corporate law system has been cannibalized by all - encompassing securities regulation directed at corporate governance, at least for companies with listed stock. This Article traces the path of that sustained intervention and makes a case — wholly contrary to the “quack corporate governance” critique much aired in the United States …

Corporate Governance And Social Welfare In The Common Law World, David A. Skeel Jr.

All Faculty Scholarship

The newest addition to the spate of recent theories of comparative corporate governance is Corporate Governance in the Common-Law World: The Political Foundations of Shareholder Power, an important new book by Christopher Bruner. Focusing on the U.S., the U.K., Canada and Australia, Bruner argues that the robustness of the country’s social welfare system is the key determinant of the extent to which its corporate governance is shareholder-centered. This explains why corporate governance is so shareholder-oriented in the United Kingdom, which has universal healthcare and generous unemployment benefits, while shareholders’ powers are more attenuated in the United States, with its …

Private Regulation Of Insider Trading In The Shadow Of Lax Public Enforcement: Evidence From Canadian Firms, Laura Nyantung Beny, Anita Anand

Articles

Like firms in the United States, many Canadian firms voluntarily restrict trading by corporate insiders beyond the requirements of insider trading laws (i.e., super-compliance). Thus, we aim to understand the determinants of firms’ private insider trading policies (ITPs), which are quasi-contractual devices. Based on the assumption that firms that face greater costs from insider trading (or greater benefits from restricting insider trading) ought to be more inclined than other firms to adopt more stringent ITPs, we develop several testable hypotheses. We test our hypotheses using data from a sample of firms included in the Toronto Stock Exchange/Standard and Poor’s (TSX/S&P) …

The Effective Tax Rate Of The Largest Us And Eu Multinationals, Reuven S. Avi-Yonah, Yaron Lahav

Articles

The United States has the second highest statutory corporate tax rate in the Organization for Economic Co-Operation and Development (OECD) (after Japan).1 This has not always been the case. After the Tax Reform Act of 1986 lowered the U.S. rate from 46% to 34%,2 the United States had one of the lowest statutory corporate tax rates in the OECD.3 In the past twenty-five years, however, the U.S. rate has remained essentially unchanged (it was raised to 35% in 1993),4 while most other OECD countries reduced their statutory rate so that the OECD average statutory corporate tax rate is 25.1%.

The Development Of Modern Corporate Governance In China And India, Nicholas C. Howson, Vikramaditya S. Khanna

Book Chapters

Corporate governance reform has become a topic of considerable debate both in the US and in many emerging markets. Indeed, the discussion is important because these reforms may have potentially long-standing effects upon the global allocation of capital, and in understanding the ways in which governance norms are communicated across markets and nations in an ever-globalizing world. In this chapter we examine the corporate governance reform efforts of the world's two biggest and fastest growing emerging markets, the People's Republic of China (PRC or China) and India. In the process we find that our understanding of how and why corporate …

International Capital Taxation., Rachel Griffith, James R. Hines Jr., Peter Birch Sørensen

Book Chapters

Globalization carries profound implications for tax systems, yet most tax systems, including that of the UK, still retain many features more suited to closed economies. The purpose of this chapter is to assess how tax policy should reflect the changing international economic environment. Institutional barriers to the movement of goods, services, capital, and (to a lesser extent) labour have fallen dramatically since the Meade Report (Meade, 1978) was published. So have the costs of moving both real activity and taxable profits between tax jurisdictions. These changes mean that capital and taxable profits in particular are more mobile between jurisdictions than …

Securities Class Actions Move North: A Doctrinal And Empirical Analysis Of Securities Class Actions In Canada, Adam C. Pritchard, Janis P. Sarra

Articles

The article explores securities class actions involving Canadian issuers since the provinces added secondary market class action provisions to their securities legislation. It examines the development of civil liability provisions, and class proceedings legislation and their effect on one another. Through analyses of the substance and framework of the statutory provisions, the article presents an empirical and comparative examination of cases involving Canadian issuers in both Canada and the United States. In addition, it explores how both the availability and pricing of director and officer insurance have been affected by the potential for secondary market class action liability. The article …

London As Delaware?, Adam C. Pritchard

Articles

Jurisdictional competition in corporate law has long been a staple of academic-and sometimes, political-debate in the United States. State corporate law, by long-standing tradition in the United States, determines most questions of internal corporate governance-the role of boards of directors, the allocation of authority between directors, managers and shareholders, etc.-while federal law governs questions of disclosure to shareholders-annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently in the Sarbanes-Oxley Act of 2002, this dividing line between state and federal law persists, so state law arguably has the most immediate impact on corporate governance outcomes.

London As Delaware?, Adam C. Pritchard

Articles

In the United States, state corporate law determines most questions of internal corporate governance - the role of directors; the allocation of authority between directors, managers, and shareholders; etc. - while federal law governs questions of disclosure to shareholders - annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently with the Sarbanes-Oxley Act, this dividing line between state and federal law persists, so state law arguably has the most immediate effect on corporate governance outcomes.

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …

Shareholder Democracy On Trial: International Perspective On The Effectiveness Of Increased Shareholder Power, Lisa Fairfax

All Faculty Scholarship

Shareholder democracy - efforts to increase shareholder power within the corporation - appears to have come of age, both within the United States and abroad. In the past few years, U.S. shareholders have worked to strengthen their voice within the corporation by seeking to remove perceived impediments to their voting authority. These impediments include classified boards, the plurality standard for board elections, and the inability to nominate directors on the corporation's ballot. Shareholders' efforts have also extended to seeking a voice on the compensation of corporate officers and directors. Advocates of shareholder democracy believe that such efforts are critical to …

Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah

Articles

Since 1994, the trend in the United States and other developed countries appears to be to reduce the scope of residence jurisdiction and increase the emphasis on source jurisdiction. If this trend continues, these countries are likely to move toward territoriality and decrease the emphasis on their CFC rules. In the author’s opinion, the reason for this trend is political and economic, not legal. It is part of tax competition, specifically the competition to be the headquarters jurisdiction for multinationals. The author also thinks, however, that it is not necessary to go down this road because the solution to the …

Do Investors In Controlled Firms Value Insider Trading Laws? International Evidence, Laura Nyantung Beny

Articles

This article characterizes insider trading as an agency problem in firms that have a controlling shareholder. Using a standard agency model of corporate value diversion through insider trading by the controlling shareholder, I derive testable hypotheses about the relationship between corporate value and insider trading laws among such firms. The article tests these hypotheses using firm-level cross-sectional data from twenty-seven developed countries. The results show that stringent insider trading laws and enforcement are associated with greater corporate valuation among the sample firms in common law countries, a result that is consistent with the claim that insider trading laws mitigate agency …

Insider Trading Laws And Stock Markets Around The World: An Empirical Contribution To The Theoretical Law And Economics Debate, Laura Nyantung Beny

Articles

The primary goal of this Article is to bring empirical evidence to bear on the heretofore largely theoretical law and economics debate about insider trading. The Article first summarizes various agency, market, and contractual (or "Coasian") theories of insider trading propounded over the course of this longstanding debate. The Article then proposes three testable hypotheses regarding the relationship between insider trading laws and several measures of stock market performance. Exploiting the natural variation of international data, the Article finds that more stringent insider trading laws are generally associated with more dispersed equity ownership, greater stock price accuracy and greater stock …

Well-Known Seasoned Issuers In Canada, Adam C. Pritchard

Other Publications

The United States Securities and Exchange Commission (SEC) recently adopted a series of rules relaxing the restrictions imposed on public offerings. The largest public companies - defined as “well-known seasoned issuers” (WKSIs) - received the most extensive regulatory relief. Canada could adopt a version of WKSI status for the top tier of Toronto Stock Exchange (TSX) issuers as part of a streamlined POP system.

Careful consideration must be given, however, as to the appropriate standards for WKSI status in Canada. The standards adopted in the U.S. – US$700 million in market capitalization or US$1 billion in nonconvertible debt issued over …

Comparative Fiscal Federalism: What Can The U.S. Supreme Court And The European Court Of Justice Learn From Each Other's Tax Jurisprudence?, Reuven S. Avi-Yonah

Articles

In October 2005, a group of distinguished tax experts from the European Union and the United States, who had never met before, convened at the University of Michigan Law School for a conference on "Comparative Fiscal Federalism: Comparing the U.S. Supreme Court and European Court of Justice Tax Jurisprudence." The purpose of the conference was to shed comparative light on the very different approaches taken by the European Court of Justice (ECJ) and the U.S. Supreme Court to the question of fiscal federalism. The conference was sponsored by the U-M Law School, U-M's European Union Center, and Harvard Law School's …

China's Acquisitions Abroad - Global Ambitions, Domestic Effects, Nicholas C. Howson

Articles

In the past year or so, the world has observed with seeming trepidation what appears to be a new phenomenon-China's "stepping out" into the world economy. The move, labeled the "Going Out Strategy" by Chinese policy makers, sees China acting in the world not just as a trader of commodities and raw materials, or the provider of inexpensively-produced consumer goods for every corner of the globe, but as a driven and sophisticated acquirer of foreign assets and the equity interests in the legal entities that control such assets. The New Yorker magazine, ever topical and appropriately humorous, highlighted this attention …

Taxation Of Spin-Off – U.S. And German Corporate Tax Law, Stefan W. Suchan

Cornell Law School J.D. Student Research Papers

Corporate law provides for a transaction commonly referred to as “spin-off”. The corporate enterprise is divided in (at least) two corporations. The stock of a controlled subsidiary will be distributed pro rata by a parent corporation to its shareholders which end up owning a brother/sister pair of corporate enterprises.

The Internal Revenue Code (IRC) in § 355 provides special rules for the distribution of stock and securities of a controlled corporation. The transaction is known as a “D reorganization”, if such a distribution follows the transfer by a corporation of all or a part of its assets to another corporation, …

Post-Enron: U.S. And German Corporate Governance, Stefan W. Suchan

Cornell Law School J.D. Student Research Papers

Only five years after Henry Hansmann and Reinier Kraakmann announced "the End of History of Corporate Law" – borrowing the words of Francis Fukuyama–, this observation seems at least questionable. Following two major failures of the “American Model” with the bankruptcy of Enron and WorldCom, the question of the "right" Corporate Governance regime is again under discussion.

Legislators around the globe assume that further development of Corporate Governance is necessary. There is consent for the need of improvement, but no clear answer on how to improve. A first step to solving the arising problems might be to evaluate the reasons …

Adr Without Borders, Theodore J. St. Antoine

Articles

My task is to assess the ways in which alternative dispute resolution procedures may be adapted to deal with international labor disputes. ADR refers to various methods by which neutral third parties assist persons engaged in a conflict to settle their differences without involving the decision-making power of the state or other sanction-imposing body. Both mediation and arbitration are included. In mediation the neutral seeks to get the parties to agree on a mutually acceptable solution. In arbitration the neutral imposes a solution after presentations by the contending parties. A third term, conciliation, is sometimes used and generally connotes a …

Competition, Corporate Responsibility, And The China Question, Jospeh Vining

Other Publications

"Corporate responsibility" is not a peripheral matter. It is at the core of all decision-making on behalf of business corporations under American law. This paper examines the effort to add an exemption for "business" in corporate form to the exemptions from ordinary responsibility that are seen in other areas of activity - e.g., for the military, for lawyers in adversarial litigation, or for investigators in scientific research. It looks at a number of well known cases and points to the often neglected relevance of both the criminal law applicable to corporations as such, and the evolving professional responsibility of corporate …

Stakeholder Protection In Germany And Japan, Mark J. Loewenstein

Publications

This Essay considers the stakeholder debate in the context of the German and Japanese legal systems. Although, nominally, corporations in those countries must operate in the interests of shareholders, in fact nonshareholder constituencies have considerable influence on corporate decision makers. Of equal importance, weak securities markets and ineffective or nonexistent legal protections for shareholders are also important factors in strengthening the position of nonshareholder constituencies and freeing directors to consider their interests. Thus, the stakeholder debate is more of an issue in the United States and Britain, where more shareholder-centic models flourish.

Corporate Distributions To Shareholders In Delaware And In Israel, Anat Urman

LLM Theses and Essays

This thesis considers the corporate legal systems of Israel and Delaware as they address the subject of corporate distributions to shareholders. The thesis reviews the significance of cash dividends and the acquisition by corporations of their own stock, in the management and survival of corporations, the effect they have on the disposition of creditors, and the extent to which they are restricted by operation of law. The thesis demonstrates how dividends and share repurchases may translate into a transfer of value from creditors to shareholders. It considers the effectiveness of the legal capital in securing creditors’ interest, and concludes that …