Private Benefits of Control: An International Comparison

We construct a measure of the private benefits of control in 39 countries based on 412 control transactions between 1990 and 2000. We find that the value of control ranges between 4% and +65%, with an average of 14 percent. As predicted by theory, in countries where private benefits of control are larger capital markets are less developed, ownership is more concentrated, and privatizations are less likely to take place as public offerings. We also analyze what institutions are most important in curbing these private benefits. A high degree of statutory protection of minority shareholders and high degree of law enforcement are associated with lower levels of private benefits of control, but so are a high level of diffusion of the press, a high rate of tax compliance, and a high degree of product market competition. A crude R-squared test suggests that the 'non traditional' mechanisms have at least as much explanatory power as the legal ones commonly mentioned in the literature. In fact, in a multivariate analysis newspapers' circulation and tax compliance seem to be the dominating factors. We advance an explanation why this might be the case.

The Corporate Governance Role of the Media

In this paper we discuss the role of the media in pressuring corporate managers and directors to behave in ways that are 'socially acceptable'. Sometimes this coincides with shareholders' value maximization, others not. We provide both anecdotal and systematic evidence that media affect companies' policy toward the environment and the amount of corporate resources that are diverted to the sole advantage of controlling shareholders. Our results have important consequences for the focus of the corporate governance debate and for the feasibility of reforms aimed at improving corporate governance around the world.

The Corporate Governance Role of the Media: Evidence from Russia

We study the effect of media coverage on corporate governance outcomes by focusing on Russia in the period 1999-2002. Russia provides a setting with multiple examples of corporate governance abuses, where traditional corporate governance mechanisms are ineffective, and where we can identify an exogenous source of news coverage arising from the presence of an investment fund, the Hermitage fund, that tried to shame companies by exposing their abuses in the international media. We find that the probability that a corporate governance abuse is reversed is affected by the coverage of the news in the Anglo-American press. The result is not due to the endogeneity of news reporting since this result holds even when we instrument media coverage with the presence of the Hermitage fund among its shareholders and the “natural” newsworthiness of the company involved. We confirm this evidence with a case study.

The Corporate Governance Role of the Media: Evidence from Russia

We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999-2002. This setting offers us three ideal conditions for such a study: plenty of corporate governance violations, no alternative mechanisms to address them, and the presence of an investment fund (the Hermitage) that actively lobbies the international press to shame companies perpetrating those violations. We find that Hermitage’s lobbying is effective in increasing the coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitage’s portfolio composition at the beginning of the period. The Hermitage’s strategy seems to work in part by impacting Russian companies’ reputation abroad and in part by forcing regulators into action.

Who Blows the Whistle on Corporate Fraud?

What external control mechanisms are most effective in detecting corporate fraud? To address this question we study in depth all reported cases of corporate fraud in companies with more than 750 million dollars in assets between 1996 and 2004. We find that fraud detection does not rely on one single mechanism, but on a wide range of, often improbable, actors. Only 6% of the frauds are revealed by the SEC and 14% by the auditors. More important monitors are media (14%), industry regulators (16%), and employees (19%). Before SOX, only 35% of the cases were discovered by actors with an explicit mandate. After SOX, the performance of mandated actors improved, but still account for only slightly more than 50% of the cases. We find that monetary incentives for detection in frauds against the government influence detection without increasing frivolous suits, suggesting gains from extending such incentives to corporate fraud more generally.

Theft and Taxes

This paper analyzes the interaction between corporate taxes and corporate governance. We show that the characteristics of a taxation system affect the extraction of private benefits by company insiders. A higher tax rate increases the amount of income insiders divert and thus worsens governance outcomes. In contrast, stronger tax enforcement reduces diversion and, in so doing, can raise the stock market value of a company in spite of the increase in the tax burden. We also show that the corporate governance system affects the level of tax revenues and the sensitivity of tax revenues to tax changes. When the corporate governance system is ineffective (i.e., when it is easy to divert income), an increase in the tax rate can reduce tax revenues. We test this prediction in a panel of countries. Consistent with the model, we find that corporate tax rate increases have smaller (in fact, negative) effects on revenues when corporate governance is weaker. Finally, this approach provides a novel justification for the existence of a separate corporate tax based on profits.

A micro-mechanically motivated phenomenological yield function for cubic crystal aggregates

A micro‐mechanically motivated phenomenological yield function, for polycrystalline cubic metals is presented. In the suggested yield function microstructure is taken into account by the crystallographic orientation distribution function in terms of tensorial Fourier coefficients. The yield function is presented in a polynomial form in powers of the stress state. Known group‐theoretic results are used to identify isotropic and anisotropic parts in the yield function, whereby anisotropic parts are characterized by tensorial Fourier coefficients. The form of the presented yield function is inspired by the classic, phenomenological von Mises ‐ Hill yield function first published in 1913. For a specific choice of material parameters, both functions coincide, thus a micro‐mechanically motivated generalization of the von Mises ‐ Hill yield function is presented. For the given yield function, two dimensional experimental results are sufficient, to identify a three dimensional anisotropic yield behavior. The work concludes with a treatment of the isotropic special case, i.e. a tension‐compression split in yield behavior as well as parameter ranges for convexity and shapes of the yield surface

Maritime Digital Twin architecture

Digital Twins (DTs) play an important role in current digitalization trends across industries. As maritime markets are particularly affected by recent global tendencies such as increasing delivery costs or political pressure for decarbonization, DT solutions could provide important support for shipbuilding and shipping companies to master recent and upcoming challenges. This paper provides a brief insight into the current state of the maritime industry and shows possible use-cases for DT Ship applications throughout the entire product lifecycle. To further advance the general understanding of DTs and their implementation, the concept of a Maritime Digital Twin Architecture (MDTA) is proposed to structure practical DT features