Corporate group

About: Corporate group is a research topic. Over the lifetime, 1747 publications have been published within this topic receiving 46868 citations.

Intra-Firm Trade Law: Contract Enforcement and Dispute Resolution in Transnational Corporations

Abstract: What is intra-firm trade law? In this article we propose that intra-firm trade law is a branch of transnational commercial law. Transnational commercial law, in turn, is a concept related to interdisciplinary legal studies which focuses on the question of how modern trade is institutionally organised in practice, and what role law plays in this context (Calliess et al., 2007). The formulation of this question contains a number of implications for the analysis of commercial law: First, following New Institutional Economics (Furubotn & Richter, 2005; Williamson, 2008) instead of the legal concept of contract, the generic term of transaction, as known also from the US Uniform Commercial Code, takes centre stage. Second, the main emphasis is on the analysis of cross-border transactions since the foreign trade-to-Gross-Domestic-Product (GDP) ratio of Germany, for example, reached an all-time high of 75.9 per cent in 2012.1 And third, in terms of methodology a functional-empirical approach to the topic includes, apart from legal, also alternative forms of governance as being of paramount importance (Calliess & Zumbansen, 2010).

'The Good, the Bad, and the Ugly': Private Benefits of Control and Their Regulatory Implications

Abstract: This paper attempts to shed a new light on the economics and the law of corporate governance. It so does by taking stock of the weaknesses of the standard account of how law "matters" for separation of ownership and control. This account fails to explain comparative corporate governance. Both the ownership structure and the functioning of the market for corporate control do not seem to depend entirely on the strength with which non-controlling shareholders are protected by corporate law. Without claiming that legal protection of minority shareholders does not matter in corporate governance, this paper shows that protection and exchange of corporate control is at least as important and so are the legal institutions that support them. This result is derived by introducing a third category of private benefits of control (idiosyncratic PBC), which supplements the more traditional specifications as inefficient consumption of control perquisites (distortionary PBC) or outright expropriation of shareholder value (diversionary PBC). The implications for corporate law are broader than those of the law matters framework. Even though legal institutions effectively constrain expropriation of non-controlling shareholders, they may still make corporate governance inefficient when they fail to provide entitlements to uncontested control independently of how much ownership is retained by corporate controllers. Likewise, regulation may undermine the takeover process when it restricts side payments that ultimately support efficient bargaining upon the value of corporate control.

The market for partial corporate control in Europe

Abstract: This paper analyzes corporate raiders in Europe during the period 1990-2001. On average, there is a positive market reaction to the first public announcement of stockholding of these investors in a company. Raiders earn abnormal profit when they sell their stakes within one year of the initial purchase. Conversely, when raiders are still shareholders in a company on 31 December 2001 abnormal returns are significant and negative. There is no clear support for the hypothesis that raiders affect firm performances at accounting level. Holderness and Sheehan (1985)’s hypotheses are not supported by the evidence. Evidence at individual investor level is provided as well. JEL classification code: G34. University of Lugano, Via Buffi 13, CH-6900 Lugano, e-mail: ettore.croci@lu.unisi.ch, Tel. +41 91 9138547, Fax. +41 91 9124647 I wish to thank Lorenzo Caprio, Giovanni Barone-Adesi, Maurizio Murgia, Emanuele Bajo, Rene Stulz, Francois Degeorge, Michel Habib, Loriano Mancini, Rosario Dell’Acquila, Fabio Trojani, and an anonymous referee. I also benefited from comments from seminar partecipants at Free University of Bozen-Bolzano, University of Bologna, University of Lugano, Universita Cattolica of Milan, the 2003 Swiss Doctoral Workshop in Finance in Gerzensee, the 2003 EFA Doctorial Tutorial in Glasgow, and the 2003 meeting of the French Finance Association in Paris for their helpful suggestions. Recent empirical evidence shows that the market for partial corporate control exists in Europe. This market is characterized by the attempt of a minority investor to influence and trigger changes in a firm’s corporate policies. Although there are different types of investors who buy blocks of stocks in public companies, only activist investors seek to exert effort to have their proposals implemented. During the 1990s, Europe started to become familiar with this kind of investors, already known in the US for a long time1. I examine a group of investors well-known for their activist behavior that operate in Europe. In particular, I collected data about their stake acquisitions in Europe during the period January 1990-December 2001. These corporate raiders differ from the typical 1980s US raider investigated by Holderness and Sheehan (1985). In fact, they are not usually interested in acquiring the full control of target firms and often (not always) cannot do it because firms have a majority shareholder. These investors normally invest in a company without the agreement of the incumbent management or majority shareholders. To some extent, they are more similar to Bethel, Liebeskind, and Opler (1998) active investors. I have no knowledge of any study that investigates raiders in Europe. The role played by these investors is quite controversial. These investors are often believed to be interested only in short-term profit. On the other hand, they are sometimes described as corporate governance champions who help introduce Anglo-Saxon shareholder value into Continental Europe. The evidence collected is used to evaluate the behavior of the raiders. The basic hypotheses are those put forward by Holderness and Sheehan (1985): the raiding hypothesis, the superior stock picking hypothesis, and the corporate governance champion hypothesis. The raiding hypothesis calls for an expropriation of corporate assets by the raider. If raiders are aboveaverage stock pickers, they should be able to earn positive abnormal returns and time the market. However, raiders have no role in improving corporate performances. Conversely, under the corporate governance champion hypothesis, raiders are the drivers of the target firm’s improvement. In addition, a fourth hypothesis is added. This hypothesis, i.e. the opportunistic behavior hypothesis, is based on the fact that raiders can change their mind and behave differently from the original strategy according to the situation.