Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad?
The World Bank’s Doing Business Report (DBR) ranks every year numerous jurisdictions across the globe according to their ability to facilitate business activities. Among the indexes contributing to the definition of the global competitiveness of the legislations, the “Protecting investors index” (PI...
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| Format: | Article |
| Language: | English |
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University of Bologna
2016-07-01
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| Series: | University of Bologna Law Review |
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| Online Access: | https://bolognalawreview.unibo.it/article/view/5583 |
| _version_ | 1811258976491274240 |
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| author | Luca Enriques Matteo Gargantini |
| author_facet | Luca Enriques Matteo Gargantini |
| author_sort | Luca Enriques |
| collection | DOAJ |
| description | The World Bank’s Doing Business Report (DBR) ranks every year numerous jurisdictions across the globe according to their ability to facilitate business activities. Among the indexes contributing to the definition of the global competitiveness of the legislations, the “Protecting investors index” (PII) measures the protection of minority shareholders in listed companies. In this paper, we analyse the DBR’s assessment of the Italian regulatory framework on investor protection. We find that the PII falls short of properly evaluating the applicable rules. First, it underrates Italy because the DBR evaluation falls short of properly evaluating the role performed by independent directors under Italian rules on related party transactions. In particular, the DBR fails to properly account for independent directors’ power to veto unfair transactions before they are submitted to the board, a safeguard that ensures minority investors’ protection at least as well as mandatory abstention by conflicted directors. Second, past DBR overrated the PII, so that subsequent reforms that substantially improved investor protection have not been grasped by more recent assessments, giving the misleading impression that no relevant changes have occurred. Far from representing one of the multiple coding errors reported in the literature, these flaws aptly show that the DBR methodology, while correctly attempting to preserve consistency in the evaluation of different jurisdictions, adopts an excessively formalistic approach and disregards the function of the rules it scrutinizes. In light of the influence that the DBR exerts on national policymakers, this approach is detrimental because it might induce window-dressing reforms. Moreover, it may rule out experimentation, which is key to ensuring that the applicable rules keep pace with the variety of techniques adopted to expropriate minority shareholders. |
| first_indexed | 2024-04-12T18:23:36Z |
| format | Article |
| id | doaj.art-801d811666b34c50a481f92423c274bd |
| institution | Directory Open Access Journal |
| issn | 2531-6133 |
| language | English |
| last_indexed | 2024-04-12T18:23:36Z |
| publishDate | 2016-07-01 |
| publisher | University of Bologna |
| record_format | Article |
| series | University of Bologna Law Review |
| spelling | doaj.art-801d811666b34c50a481f92423c274bd2022-12-22T03:21:20ZengUniversity of BolognaUniversity of Bologna Law Review2531-61332016-07-011113310.6092/issn.2531-6133/55835609Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad?Luca Enriques0Matteo Gargantini1University of OxfordMax Planck InstituteThe World Bank’s Doing Business Report (DBR) ranks every year numerous jurisdictions across the globe according to their ability to facilitate business activities. Among the indexes contributing to the definition of the global competitiveness of the legislations, the “Protecting investors index” (PII) measures the protection of minority shareholders in listed companies. In this paper, we analyse the DBR’s assessment of the Italian regulatory framework on investor protection. We find that the PII falls short of properly evaluating the applicable rules. First, it underrates Italy because the DBR evaluation falls short of properly evaluating the role performed by independent directors under Italian rules on related party transactions. In particular, the DBR fails to properly account for independent directors’ power to veto unfair transactions before they are submitted to the board, a safeguard that ensures minority investors’ protection at least as well as mandatory abstention by conflicted directors. Second, past DBR overrated the PII, so that subsequent reforms that substantially improved investor protection have not been grasped by more recent assessments, giving the misleading impression that no relevant changes have occurred. Far from representing one of the multiple coding errors reported in the literature, these flaws aptly show that the DBR methodology, while correctly attempting to preserve consistency in the evaluation of different jurisdictions, adopts an excessively formalistic approach and disregards the function of the rules it scrutinizes. In light of the influence that the DBR exerts on national policymakers, this approach is detrimental because it might induce window-dressing reforms. Moreover, it may rule out experimentation, which is key to ensuring that the applicable rules keep pace with the variety of techniques adopted to expropriate minority shareholders.https://bolognalawreview.unibo.it/article/view/5583Doing Business Reportinvestor protectionrelated party transactionslaw and financecomparative corporate governance |
| spellingShingle | Luca Enriques Matteo Gargantini Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? University of Bologna Law Review Doing Business Report investor protection related party transactions law and finance comparative corporate governance |
| title | Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? |
| title_full | Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? |
| title_fullStr | Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? |
| title_full_unstemmed | Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? |
| title_short | Form and Function in Doing Business Rankings: is Investor Protection in Italy Still so Bad? |
| title_sort | form and function in doing business rankings is investor protection in italy still so bad |
| topic | Doing Business Report investor protection related party transactions law and finance comparative corporate governance |
| url | https://bolognalawreview.unibo.it/article/view/5583 |
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