K20 - Regulation and Business Law: GeneralReturn

This article investigates the relationship between institutional quality and the level of investment inflows into post-communist countries. We attempt to empirically verify the argument that institutional determinants are essential in explaining the variation in investment inflows into transition economies after the demise of socialism in the early 1990s. The role of institutions is assessed using Economic Freedom indices provided by the Heritage Foundation. Consequently, to investigate the progress of institutional quality in transition economies, we further employ indicators developed by the European Bank for Reconstruction and Development. Using a panel data set for 11 transition countries from 1993 to 2013, we conclude that the impact of institutional quality on investment inflows is not negligible, yet much weaker than suggested by the existing theoretical literature. Using a fixed-effects model framework in both regression benchmarks with metrics from the Heritage Foundation and the European Bank for Reconstruction and Development, respectively, we observe that the impact of institutional variables on the level of investment was less significant than expected. Moreover, macroeconomic fundamentals appear to always play a more substantial role than institutional factors.

The purpose of this article is to compare laws regulating corporate groups in Germany, the United Kingdom and France in order to find the optimal model of regulation of corporate groups and then to compare the findings with the proposed Commercial Corporation Act. Generally, the difference between the concepts lies in the approach to the issue of respecting or not respecting the duty of loyalty within corporate groups. Under certain conditions, German law enables a parent company to promote interests of the whole group at the expense of a subsidiary. It creates a system of specific rules in order to comprehensively regulate such interferences of the parent company and thus to protect the subsidiary. On the other hand, British law insists on compliance with the duty of loyalty and equips minority shareholders and creditors with legal means for their protection. French law represents a compromise between these approaches as it allows promotion of interests of the whole group at the expense of a subsidiary only under strict conditions. However, if these conditions are met, it enables the parent company to promote its interests in an even broader way than German law does. It also provides minority shareholders and creditors with direct protection. In French law on corporate groups, jurisprudence plays an important role which enables a flexible response to developments in the economic sphere. Thus, on the one hand, French law enables the parent company to effectively manage the corporate group as an economic unit and, on the other hand, it provides endangered subjects with functional instruments of protection. For this reason, the French approach can be recommended. The proposed Commercial Corporation Act is inspired by the French model, which can be evaluated as positive.