Abstract Regulatory arbitrage – the formal compliance with rules while violating their very spirit – is a persistent practice in daily business and subject of perpetual efforts of regulatory institutions to address this issue. Focusing on both, the practice of regulatory arbitrage as well as attempt of regulators and rule-makers seeking to contain it, the articles in this special issue provide a well-rounded, dialectical understanding of the phenomenon. In this vein, Friedrich zooms in on the construct of synthetic leasing as an example of a product, placed in zones of regulatory overlap between tax and accounting to achieve the most beneficial treatment. Kunkel discusses the political dimension of the conceptual underpinnings of financial reporting and how they are linked to regulatory arbitrage in accounting standards. Stanescu and Bogdan focus on tax sheltering in Romanian debt collecting schemes, just as Langenbucher explores the limits of constraining such practices provided by the need to grant a high degree of legal security, as enshrined in the rule of law. Lastly, Thiemann and Troeger inquire into how supervisors can keep up with financial innovations for regulatory arbitrage in the shadow banking sector, suggesting the need for a flexible interpretation of rules and close exchange with the regulated and their regulatory advisors to control their role bending behavior.
{"title":"The Economic, Legal and Social Dimension of Regulatory Arbitrage","authors":"Jan Friedrich, M. Thiemann","doi":"10.1515/ael-2020-0150","DOIUrl":"https://doi.org/10.1515/ael-2020-0150","url":null,"abstract":"Abstract Regulatory arbitrage – the formal compliance with rules while violating their very spirit – is a persistent practice in daily business and subject of perpetual efforts of regulatory institutions to address this issue. Focusing on both, the practice of regulatory arbitrage as well as attempt of regulators and rule-makers seeking to contain it, the articles in this special issue provide a well-rounded, dialectical understanding of the phenomenon. In this vein, Friedrich zooms in on the construct of synthetic leasing as an example of a product, placed in zones of regulatory overlap between tax and accounting to achieve the most beneficial treatment. Kunkel discusses the political dimension of the conceptual underpinnings of financial reporting and how they are linked to regulatory arbitrage in accounting standards. Stanescu and Bogdan focus on tax sheltering in Romanian debt collecting schemes, just as Langenbucher explores the limits of constraining such practices provided by the need to grant a high degree of legal security, as enshrined in the rule of law. Lastly, Thiemann and Troeger inquire into how supervisors can keep up with financial innovations for regulatory arbitrage in the shadow banking sector, suggesting the need for a flexible interpretation of rules and close exchange with the regulated and their regulatory advisors to control their role bending behavior.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"1 1","pages":"81 - 90"},"PeriodicalIF":1.4,"publicationDate":"2020-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89078982","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract It is now 50 years since Milton Friedman set out his doctrine that “The Social Responsibility of Business Is to Increase Its Profits.” This paper seeks to add fresh and compelling new evidence of why Lynn Stout was correct in her resolute critique of the thesis of shareholder primacy at the heart of the Friedman doctrine, and how this doctrine remains profoundly damaging to the corporations that continue to uphold this belief. It is argued that the Friedman doctrine has had a catastrophic impact upon American business and society beginning with General Motors failure to respond to investor calls for increased concern for safety and pollution at the time of Friedman’s intervention in 1970, stretching all the way to the recent fatal errors of Boeing in placing a higher priority in getting the new Boeing 737 MAX into the market than ensuring the soundness of software controls on the flight deck which led to two horrific plane crashes in 2018 and 2019 with the loss of 346 lives. These tragic errors in corporate judgement are ultimately related to the constricted sense of corporate purpose imposed by Milton Friedman and taken up with enthusiasm by agency theorists focused upon maximising shareholder value. This reckless single-mindedness has privileged the pursuit of the narrowest of financial measures of performance above fundamentals including passenger safety and environmental emissions controls. As a result, innocent lives have been lost, brands have been tarnished, and ultimately the strategic future of significant corporations endangered, and the ecology of the planet imperilled. There is now emerging a new sense of the purpose of the corporation that defines a rationale for corporate social and environmental responsibility in a way similar to Lynn Stout’s more inclusive stakeholder approach. The question remains open whether this will lead to the development of fiduciary duties, governance, strategies, targets, measures, transparency and disclosure that might deliver the sustainable corporation.
{"title":"The Contest on Corporate Purpose: Why Lynn Stout was Right and Milton Friedman was Wrong","authors":"T. Clarke","doi":"10.1515/ael-2020-0145","DOIUrl":"https://doi.org/10.1515/ael-2020-0145","url":null,"abstract":"Abstract It is now 50 years since Milton Friedman set out his doctrine that “The Social Responsibility of Business Is to Increase Its Profits.” This paper seeks to add fresh and compelling new evidence of why Lynn Stout was correct in her resolute critique of the thesis of shareholder primacy at the heart of the Friedman doctrine, and how this doctrine remains profoundly damaging to the corporations that continue to uphold this belief. It is argued that the Friedman doctrine has had a catastrophic impact upon American business and society beginning with General Motors failure to respond to investor calls for increased concern for safety and pollution at the time of Friedman’s intervention in 1970, stretching all the way to the recent fatal errors of Boeing in placing a higher priority in getting the new Boeing 737 MAX into the market than ensuring the soundness of software controls on the flight deck which led to two horrific plane crashes in 2018 and 2019 with the loss of 346 lives. These tragic errors in corporate judgement are ultimately related to the constricted sense of corporate purpose imposed by Milton Friedman and taken up with enthusiasm by agency theorists focused upon maximising shareholder value. This reckless single-mindedness has privileged the pursuit of the narrowest of financial measures of performance above fundamentals including passenger safety and environmental emissions controls. As a result, innocent lives have been lost, brands have been tarnished, and ultimately the strategic future of significant corporations endangered, and the ecology of the planet imperilled. There is now emerging a new sense of the purpose of the corporation that defines a rationale for corporate social and environmental responsibility in a way similar to Lynn Stout’s more inclusive stakeholder approach. The question remains open whether this will lead to the development of fiduciary duties, governance, strategies, targets, measures, transparency and disclosure that might deliver the sustainable corporation.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"1 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85981977","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This article is a review of Katharina Pistor’s book The Code of Capital: How the Law Creates Wealth and Inequality. Using modern derivatives markets as a case study, it explores the important contributions – and limits – of Professor Pistor’s story about the role of the law and lawyers as the master coders of capitalism. This exploration reveals three distinct projects: a historical coding project, an intellectual decoding project, and a policy-driven recoding project. The fact that these projects are so intricately intertwined posed unique challenges for scholars, but also holds out a potential blueprint for a new law and finance.
{"title":"Three Projects in the New Law and Finance","authors":"Dan Awrey","doi":"10.1515/ael-2020-0069","DOIUrl":"https://doi.org/10.1515/ael-2020-0069","url":null,"abstract":"Abstract This article is a review of Katharina Pistor’s book The Code of Capital: How the Law Creates Wealth and Inequality. Using modern derivatives markets as a case study, it explores the important contributions – and limits – of Professor Pistor’s story about the role of the law and lawyers as the master coders of capitalism. This exploration reveals three distinct projects: a historical coding project, an intellectual decoding project, and a policy-driven recoding project. The fact that these projects are so intricately intertwined posed unique challenges for scholars, but also holds out a potential blueprint for a new law and finance.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"15 1","pages":"9 - 25"},"PeriodicalIF":1.4,"publicationDate":"2020-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75660778","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Corporate Issue: A Tribute to Lynn Stout 1. Why Lynn Stout Took Up the Sword Against Share Value Maximization, by Margaret Blair, https://doi.org/10.1515/ael-2020-0083. 2. Beating Shareholder Activism at Its Own Game, by Margaret Blair, https://doi.org/10.1515/ ael-2019-0040. 3. Ownership (Lost) and Corporate Control: An Enterprise Entity Perspective, by Yuri Biondi, https://doi.org/10.1515/ael-2019-0025. 4. The Shareholder Value Mess, by Jean-Philippe Robé, https://doi.org/10.1515/ael-2019-0039. 5. Executive Pay and Labor’s Shares: Unions and Corporate Governance from Enron to DoddFrank, by Sanford M. Jacoby, https://doi.org/10.1515/ael-2019-0073. 6. How America’s Corporations Lost Their Public Purpose, and How it Might be (Partially) Restored, by David Ciepley, https://doi.org/10.1515/ael-2019-0088. 7. The Contest on Corporate Purpose:Why Lynn Stout was Right andMilton FriedmanwasWrong, by Thomas Clarke, https://doi.org/10.1515/ael-2020-0145. 8. Lynn Stout, Pro-sociality, and the Campaign for Corporate Enlightenment, by Donald Langevoort, https://doi.org/10.1515/ael-2020-0067.
{"title":"Why Lynn Stout Took Up the Sword Against Share Value Maximization","authors":"Margaret M. Blair","doi":"10.1515/ael-2020-0083","DOIUrl":"https://doi.org/10.1515/ael-2020-0083","url":null,"abstract":"The Corporate Issue: A Tribute to Lynn Stout 1. Why Lynn Stout Took Up the Sword Against Share Value Maximization, by Margaret Blair, https://doi.org/10.1515/ael-2020-0083. 2. Beating Shareholder Activism at Its Own Game, by Margaret Blair, https://doi.org/10.1515/ ael-2019-0040. 3. Ownership (Lost) and Corporate Control: An Enterprise Entity Perspective, by Yuri Biondi, https://doi.org/10.1515/ael-2019-0025. 4. The Shareholder Value Mess, by Jean-Philippe Robé, https://doi.org/10.1515/ael-2019-0039. 5. Executive Pay and Labor’s Shares: Unions and Corporate Governance from Enron to DoddFrank, by Sanford M. Jacoby, https://doi.org/10.1515/ael-2019-0073. 6. How America’s Corporations Lost Their Public Purpose, and How it Might be (Partially) Restored, by David Ciepley, https://doi.org/10.1515/ael-2019-0088. 7. The Contest on Corporate Purpose:Why Lynn Stout was Right andMilton FriedmanwasWrong, by Thomas Clarke, https://doi.org/10.1515/ael-2020-0145. 8. Lynn Stout, Pro-sociality, and the Campaign for Corporate Enlightenment, by Donald Langevoort, https://doi.org/10.1515/ael-2020-0067.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"9 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2020-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84356517","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this reply, I respond to and elaborate on the critique of my book “The Code of Capital” published in this special issue. The common thread of the critiques is the call for more theorizing of the themes the book addresses, especially the conception of state power, of resources, social relations and questions of knowledge and access to knowledge about the law, or epistemology. This reply is only a first response to issues that do require further analysis and I am hoping to follow suit on at least some of them in the near future.
{"title":"Theorizing Beyond “The Code of Capital”: A Reply","authors":"Katharina Pistor","doi":"10.1515/ael-2020-0101","DOIUrl":"https://doi.org/10.1515/ael-2020-0101","url":null,"abstract":"Abstract In this reply, I respond to and elaborate on the critique of my book “The Code of Capital” published in this special issue. The common thread of the critiques is the call for more theorizing of the themes the book addresses, especially the conception of state power, of resources, social relations and questions of knowledge and access to knowledge about the law, or epistemology. This reply is only a first response to issues that do require further analysis and I am hoping to follow suit on at least some of them in the near future.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"12 1","pages":"65 - 80"},"PeriodicalIF":1.4,"publicationDate":"2020-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84693944","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The revision of the asset and liability definitions is at the core of the International Accounting Standards Board’s (IASB) efforts to reflect more truthfully the economic substance of the underlying business transactions. In the IASB’s revised Conceptual Framework (CF) from 2018, the board redefined assets and liabilities in terms of rights and obligations, thereby explicitly abstaining from a notion of indivisible balance sheet items. This alteration lays the conceptual foundation for carving out pieces of an item in accounting standards, enabling the removal of arbitrary bright line tests, and, eventually seeks to tackle regulatory arbitrage. Drawing upon 18 expert interviews as well as a document analysis, this study sheds light on the process that led to the anchoring of the rights and obligations model in the IASB’s CF. Using literature on ambiguities in accounting as a theoretical frame, this study goes on to show that removing ambiguities in the asset and liability definitions creates new ambiguities and additional discretionary leeway in turn. The paper argues that the perpetual cycle of ambiguity reduction and creation in accounting (Davie, 2000) also includes ambiguity shifting between the conceptual basis of financial reporting and accounting standards. By comparing the previous International Accounting Standard (IAS) 17: Leases, which followed a physicalist, ownership-based notion of assets, with the revised International Financial Reporting Standard (IFRS) 16, the paper demonstrates that the explicit anchoring of the rights and obligations approach does not fully solve the issue of regulatory arbitrage. Instead, it shifts the playing field for structuring activities from the evasion of precise rules to the bending of interpretations.
{"title":"Ambiguities in Accounting and their Impact on Regulatory Arbitrage","authors":"T. Kunkel","doi":"10.1515/AEL-2019-0049","DOIUrl":"https://doi.org/10.1515/AEL-2019-0049","url":null,"abstract":"Abstract The revision of the asset and liability definitions is at the core of the International Accounting Standards Board’s (IASB) efforts to reflect more truthfully the economic substance of the underlying business transactions. In the IASB’s revised Conceptual Framework (CF) from 2018, the board redefined assets and liabilities in terms of rights and obligations, thereby explicitly abstaining from a notion of indivisible balance sheet items. This alteration lays the conceptual foundation for carving out pieces of an item in accounting standards, enabling the removal of arbitrary bright line tests, and, eventually seeks to tackle regulatory arbitrage. Drawing upon 18 expert interviews as well as a document analysis, this study sheds light on the process that led to the anchoring of the rights and obligations model in the IASB’s CF. Using literature on ambiguities in accounting as a theoretical frame, this study goes on to show that removing ambiguities in the asset and liability definitions creates new ambiguities and additional discretionary leeway in turn. The paper argues that the perpetual cycle of ambiguity reduction and creation in accounting (Davie, 2000) also includes ambiguity shifting between the conceptual basis of financial reporting and accounting standards. By comparing the previous International Accounting Standard (IAS) 17: Leases, which followed a physicalist, ownership-based notion of assets, with the revised International Financial Reporting Standard (IFRS) 16, the paper demonstrates that the explicit anchoring of the rights and obligations approach does not fully solve the issue of regulatory arbitrage. Instead, it shifts the playing field for structuring activities from the evasion of precise rules to the bending of interpretations.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"34 1","pages":"161 - 199"},"PeriodicalIF":1.4,"publicationDate":"2020-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90558154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Karthik Ramanna’s article titled “unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism” provides a critical insight into how Fair Value Accounting (FVA) was incorporated into the conceptual framework for general purpose financial reporting. Karthik reveals that the installation of FVA into the FASBs constitution can be understood through a framework: conceptual veiling. In this framework, the FASB is captured within the logics of financial market economics, assuming investors and capital market actors are best served by financial disclosures that reflect market valuations. Captured by these interests, the FASB needed to modify the narratives contained in the conceptual framework removing reliability and substituting faithful representation because much of what constitutes FVA disclosures are estimates and judgements of questionable reliability. A more forceful critical evaluation of the re-orientation of accounting practise from Historical Cost Accounting to FVA might have located changes in the context of the financialized company.
{"title":"Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism – A response to Karthik Ramanna","authors":"C. Haslam","doi":"10.1515/AEL-2020-0088","DOIUrl":"https://doi.org/10.1515/AEL-2020-0088","url":null,"abstract":"Abstract Karthik Ramanna’s article titled “unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism” provides a critical insight into how Fair Value Accounting (FVA) was incorporated into the conceptual framework for general purpose financial reporting. Karthik reveals that the installation of FVA into the FASBs constitution can be understood through a framework: conceptual veiling. In this framework, the FASB is captured within the logics of financial market economics, assuming investors and capital market actors are best served by financial disclosures that reflect market valuations. Captured by these interests, the FASB needed to modify the narratives contained in the conceptual framework removing reliability and substituting faithful representation because much of what constitutes FVA disclosures are estimates and judgements of questionable reliability. A more forceful critical evaluation of the re-orientation of accounting practise from Historical Cost Accounting to FVA might have located changes in the context of the financialized company.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"71 1","pages":"233 - 238"},"PeriodicalIF":1.4,"publicationDate":"2020-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77349244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract As an outcome of the scientific conflict within business valuation theory in the German-speaking area, New Political Economy of Business Valuation has developed a possible approach to explain the dissemination of neoclassical valuation concepts in theory and practice. This explanatory model, designed by Quill (2016), is extended by Follert (2020) to include the share valuation in squeeze-out cases for the compensation of minority shareholders. For this purpose, the different actors in the legal mediation procedure (“Spruchverfahren”)—the judge, the auditor as expert, and the conflicting parties—are modeled based on their stereotypical interests. The aim of the present paper is to introduce international scientific community to the scientific conflict between the proponents of investment-theoretical and those of the finance-theoretical conception, and to discuss the role of judicial decision-making from a legal-economic perspective. We would like to illustrate why a judge could benefit from the use of finance-theoretical valuation methods based on the neoclassical capital asset pricing model recommended by the relevant standard (so-called standard 1) of the “Institut der Wirtschaftsprüfer in Deutschland IDW” (Institute of Public Auditors in Germany) (“IDW S 1”). The analysis takes a socioeconomic perspective and argues that judicial valuation is primarily influenced by the judges’ tendency to promote their own reputation and by social pressure from their professional environment and different interest groups. This paper adds a further perspective to New Political Economy of Business Valuation. Moreover, the close link between jurisprudence, economics and business economics theory is pointed out. Although the approach presented deals with the squeeze-out under German law, it may be applicable to squeeze-out arrangements in other countries as well, as long as the basic assumptions apply in their legal systems.
作为德语区企业价值评估理论内部科学冲突的结果，新企业价值评估政治经济学发展了一种可能的方法来解释新古典价值评估概念在理论和实践中的传播。该解释模型由Quill(2016)设计，Follert(2020)对其进行了扩展，纳入了少数股东补偿挤压案例中的股票估值。为此，法律调解程序中的不同行为者(“Spruchverfahren”)——法官、作为专家的审计员和冲突各方——基于他们的刻板印象的利益进行建模。本文的目的是向国际科学界介绍投资理论支持者和金融理论支持者之间的科学冲突，并从法律经济学的角度讨论司法决策的作用。我们想说明为什么法官可以从使用基于新古典资本资产定价模型的金融理论估值方法中受益，该模型是由“德国公共审计师协会IDW”(“IDW S 1”)的相关标准(所谓的标准1)推荐的。分析从社会经济的角度出发，认为司法评价主要受到法官追求自身声誉的倾向以及来自其职业环境和不同利益群体的社会压力的影响。本文为企业价值评估的新政治经济学提供了一个新的视角。此外，还指出了法理学、经济学和商业经济学理论之间的密切联系。虽然所提出的办法处理的是德国法律规定的“排挤”问题，但只要这些基本假设适用于其他国家的法律制度，它也可能适用于“排挤”安排。
{"title":"Squeeze-Out and Business Valuation in Germany – A Law and Economics Analysis of Judicial Decision-Making","authors":"Florian Follert","doi":"10.1515/AEL-2020-0118","DOIUrl":"https://doi.org/10.1515/AEL-2020-0118","url":null,"abstract":"Abstract As an outcome of the scientific conflict within business valuation theory in the German-speaking area, New Political Economy of Business Valuation has developed a possible approach to explain the dissemination of neoclassical valuation concepts in theory and practice. This explanatory model, designed by Quill (2016), is extended by Follert (2020) to include the share valuation in squeeze-out cases for the compensation of minority shareholders. For this purpose, the different actors in the legal mediation procedure (“Spruchverfahren”)—the judge, the auditor as expert, and the conflicting parties—are modeled based on their stereotypical interests. The aim of the present paper is to introduce international scientific community to the scientific conflict between the proponents of investment-theoretical and those of the finance-theoretical conception, and to discuss the role of judicial decision-making from a legal-economic perspective. We would like to illustrate why a judge could benefit from the use of finance-theoretical valuation methods based on the neoclassical capital asset pricing model recommended by the relevant standard (so-called standard 1) of the “Institut der Wirtschaftsprüfer in Deutschland IDW” (Institute of Public Auditors in Germany) (“IDW S 1”). The analysis takes a socioeconomic perspective and argues that judicial valuation is primarily influenced by the judges’ tendency to promote their own reputation and by social pressure from their professional environment and different interest groups. This paper adds a further perspective to New Political Economy of Business Valuation. Moreover, the close link between jurisprudence, economics and business economics theory is pointed out. Although the approach presented deals with the squeeze-out under German law, it may be applicable to squeeze-out arrangements in other countries as well, as long as the basic assumptions apply in their legal systems.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"40 5 1","pages":"343 - 372"},"PeriodicalIF":1.4,"publicationDate":"2020-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73099203","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Non-judicial recovery of debts is now rampant in Central and Eastern Europe (CEE). The reason is two-fold. On the one hand, the significant number of defaults in the poorer areas of Europe makes the CEE region a very attractive market for debt-collection. On the other hand, the activity is almost entirely unregulated, especially regarding abusive debt collection practices. The CEE region still lacks mature, strong, and experienced supervisory agencies that could tackle borderline activities. This enables companies involved in debt collection to comply easily with the minimal legal provisions and to circumvent the actual purpose of the law, including through tax sheltering and money laundering. The main argument developed in the paper is that the debt collection system it is designed to maximize profits, minimize tax base and, potentially, can serve as money laundering mechanism. The system functions in a triadic relationship: the debt-seller (a credit institution), the debt-buyer (usually an investment company), and the debt-administrator (a debt-collection agency, either fully owned by, or under the control of the debt-buyer), where debt portfolios are purchased at huge discounts (varying between 90 and 95% of face value). By revealing the mechanism used by debt-collectors, the paper calls for legislative intervention to seal the gap and ensure adequate taxation of debt-collection activities. The nature of regulatory arbitrage involved relates both to tax law as well as to regulatory standards, such as licensing requirements. Debt buyers benefit from the EU passport rule, make high returns on their ‘investments’ and optimize their taxes on profits obtained. Debt administrators perform their activity at almost no liability and no tax payable to the state. This mechanism creates favorable premises for money laundering and financing of illegal activities, as the web of offshore companies behind the debt-buyer renders the verification of the origin of their investment money extremely difficult. Using Romania as a case study, the paper addresses not only the aforementioned practices and risks, but also the potential reasons behind the state’s inability either to adopt adequate legislation, or to enforce it. In doing so, the paper employs empirical evidence regarding the activity of ten Romanian debt collection agencies and relevant case law thereof. The paper concludes with the authors’ proposal for a potential solution, which can be extended beyond Romania.
{"title":"Regulatory Arbitrage and Non-Judicial Debt Collection in Central and Eastern Europe","authors":"C. Stănescu, Camelia Bogdan","doi":"10.1515/AEL-2019-0055","DOIUrl":"https://doi.org/10.1515/AEL-2019-0055","url":null,"abstract":"Abstract Non-judicial recovery of debts is now rampant in Central and Eastern Europe (CEE). The reason is two-fold. On the one hand, the significant number of defaults in the poorer areas of Europe makes the CEE region a very attractive market for debt-collection. On the other hand, the activity is almost entirely unregulated, especially regarding abusive debt collection practices. The CEE region still lacks mature, strong, and experienced supervisory agencies that could tackle borderline activities. This enables companies involved in debt collection to comply easily with the minimal legal provisions and to circumvent the actual purpose of the law, including through tax sheltering and money laundering. The main argument developed in the paper is that the debt collection system it is designed to maximize profits, minimize tax base and, potentially, can serve as money laundering mechanism. The system functions in a triadic relationship: the debt-seller (a credit institution), the debt-buyer (usually an investment company), and the debt-administrator (a debt-collection agency, either fully owned by, or under the control of the debt-buyer), where debt portfolios are purchased at huge discounts (varying between 90 and 95% of face value). By revealing the mechanism used by debt-collectors, the paper calls for legislative intervention to seal the gap and ensure adequate taxation of debt-collection activities. The nature of regulatory arbitrage involved relates both to tax law as well as to regulatory standards, such as licensing requirements. Debt buyers benefit from the EU passport rule, make high returns on their ‘investments’ and optimize their taxes on profits obtained. Debt administrators perform their activity at almost no liability and no tax payable to the state. This mechanism creates favorable premises for money laundering and financing of illegal activities, as the web of offshore companies behind the debt-buyer renders the verification of the origin of their investment money extremely difficult. Using Romania as a case study, the paper addresses not only the aforementioned practices and risks, but also the potential reasons behind the state’s inability either to adopt adequate legislation, or to enforce it. In doing so, the paper employs empirical evidence regarding the activity of ten Romanian debt collection agencies and relevant case law thereof. The paper concludes with the authors’ proposal for a potential solution, which can be extended beyond Romania.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"96 1","pages":"119 - 160"},"PeriodicalIF":1.4,"publicationDate":"2020-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80466506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This commentary, part of the book symposium on Katharina Pistor’s The Code of Capital, focuses in particular on the epistemic dimensions of the phenomena she describes. Knowledge can be coded as capital, through intellectual property rights, and these can be done in ways that unjustly favor privileged actors at the cost of the common good, as Pistor demonstrates with regard to the patenting of genetic markers. Interestingly, however, knowledge can also be appropriated without the use of legal tools, simply by appropriating data from consumers, as Zuboff, for example, has argued. A second epistemic dimension of Pistor’s work lies in the fact that the legal coding of capital is itself little know and receives little public discussion. This, of course, plays into the hands of those who benefit by problematic forms of such coding. By putting these issues up for debate, The Code of Capital fulfill itself an important epistemic role, which can be categorized as a form of "democratic professionalism", i.e., professionals enabling a critical public discourse about the activities in their own field.
{"title":"The Laws of Knowledge, Knowledge of Laws","authors":"Lisa Herzog","doi":"10.1515/ael-2020-0064","DOIUrl":"https://doi.org/10.1515/ael-2020-0064","url":null,"abstract":"Abstract This commentary, part of the book symposium on Katharina Pistor’s The Code of Capital, focuses in particular on the epistemic dimensions of the phenomena she describes. Knowledge can be coded as capital, through intellectual property rights, and these can be done in ways that unjustly favor privileged actors at the cost of the common good, as Pistor demonstrates with regard to the patenting of genetic markers. Interestingly, however, knowledge can also be appropriated without the use of legal tools, simply by appropriating data from consumers, as Zuboff, for example, has argued. A second epistemic dimension of Pistor’s work lies in the fact that the legal coding of capital is itself little know and receives little public discussion. This, of course, plays into the hands of those who benefit by problematic forms of such coding. By putting these issues up for debate, The Code of Capital fulfill itself an important epistemic role, which can be categorized as a form of \"democratic professionalism\", i.e., professionals enabling a critical public discourse about the activities in their own field.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"45 1","pages":"27 - 35"},"PeriodicalIF":1.4,"publicationDate":"2020-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90694883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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