Investor Protection Research Articles

Corporate governance and foreign direct investment in Latin America

Purpose Hitherto, several Latin American countries have pinned their hopes for growth in international markets through foreign direct investments (FDIs). However, much investor confidence is shaped by perceptions of the country’s corporate governance pillars, such as accountability, board efficacy and investor protection. Thus, this study aims to examine how these corporate governance pillars impact on FDI inflows among the countries in this region. Design/methodology/approach The research design is a causal longitudinal non-experimental empirical study that uses the gravity model of the FDI bilateral flow from 17 Latin American countries from 10 years before COVID-19, obtained from 272 bilateral flows and 2,992 observations. The authors factorized and normalized country-level corporate governance measures from the World Bank and generated the dynamic panel data estimates with the Arellano–Bond two-step generalized method of moments system. Findings The findings of this study are robust concerning previous gravity models, showing that FDI bilateral flows depend significantly on their lagged flows and the economic growth of the reporter countries. This study shows accountability and board efficacy significantly increase FDI bilateral flows in Latin America. Investor protection only positively influences the FDI bilateral flow if it is from the home country. Originality/value The literature on the relationship between FDI and corporate governance is relatively scarce to justify such pillars of corporate governance in Latin America from the perspective of bilateral investment flows. Thus, this study seeks precisely to deepen the analysis of the relationship between FDI flows and corporate governance. Additionally, the authors present theoretical and policy implications with a future research agenda.

The Impact of Environmental Subsidies and Enforcement on Green Innovation: Evidence from Heavy-Polluting Enterprises in China

This paper investigates the critical role of government policies in promoting green development through enterprise-level green innovation (GI). We specifically examine the impact of environmental subsidies (ES) on heavily polluting enterprises and analyze how government environmental enforcement (EE) moderates this relationship. Furthermore, we explore how these effects vary across different ES characteristics and allocation patterns. Using data from heavy-polluting enterprises listed on China’s A-share market from 2012 to 2021, our analysis reveals several key findings. First, ES has unexpectedly hindered GI in heavily polluting enterprises. This negative effect stems from both ES characteristics and allocation patterns. Specifically, advance subsidies, targeted subsidies, and pollution prevention subsidies prove ineffective. The adverse impact of ES on GI is particularly pronounced in state-owned enterprises, companies lacking environmental protection investments, and firms engaging in earnings management practices. However, our findings indicate that strong environmental enforcement (EE) can effectively mitigate these ES-related issues. Under strict EE, ES demonstrates a positive effect on GI and addresses problems associated with both ES design characteristics and allocation patterns. These results offer valuable insights for government policymakers, particularly in developing countries undergoing green transition, to design and implement more effective environmental policies.

Beyond Investment Protection and ISDS: Towards an Investment Law Research Agenda Focusing on Investment Facilitation and Liberalization Commitments

Abstract This research note contributes to moving the scholarly field of international investment law beyond its dominant focus in recent decades on issues of post-admission investment protection and investor–State dispute settlement (ISDS). Specifically, it maps a future research agenda focusing on issues of investment facilitation and investment liberalization. This research note analyses several common and important themes that arise in relation to treaty-based investment facilitation and investment liberalization commitments. These include the value-added of international legally binding obligations, the impact of international commitments on States' applied policies, and a notable shift away from investor–State arbitration towards State–State dispute settlement only and mechanisms for ongoing cooperation between the treaty parties. These themes raise challenging questions, which often call for future empirical research employing methods other than traditional legal analysis. Nevertheless, this research note suggests that the scholarly field of international investment law has much to gain from shifting some of its focus away from well-versed issues of investment protection and ISDS towards under-researched questions concerning investment facilitation and investment liberalization commitments.

Green Taxes and their Impact on Romanian’s Economy compared to Investments for Air and Climate Protection

Climate changes are more and more evident and their effect is increasingly extensive, and in the current context the environmental taxes may become a key factor in ensuring the sustainable development for the entire society. This article presents a medium-term analysis of the main categories of environmental taxes, their evolution compared to the investments for air and climate protection, as a percentage of GDP, made in Romania. Four main categories of environmental taxes: energy taxes (including transport fuels); transport taxes (excluding transport fuels); pollution taxes and resource taxes are collected in Romania, yearly. The data used in this study provides from the National Institute of Statistics. During 2006-2020, in Romania the highest percentage is represented by energy taxes 88%, in second place are taxes for transports 10% and in the third and fourth places with insignificant percentages (about 1%) are the taxes for resources and for pollution. From the four categories of environmental taxes, it can be seen that resource taxes have a decreasing trend from 51.6 million euros in 2006 to 3.84 million euros in 2020, while energy taxes, transport taxes and pollution taxes have an increasing trend. Keywords: climate changes, environmental taxes, sustainable development, air and climate protection

Does more uncertainty incentivize risk diversification in conservation?

AbstractConservation investments must balance risk and return as the benefits and costs of conservation are becoming increasingly difficult to predict. This article investigates whether a more uncertain world will strengthen the case for conservation investments strategies that diversify risk. We consider two ways the world could be more uncertain: (1) a more uncertain future climate that increases uncertainty in conservation benefits and (2) broader market uncertainties affecting conservation costs. We use concepts from expected utility theory to highlight that, as there is more risk to diversify, the incentive and ability to diversify risk depend on relative changes in expected payoffs at each site and covariances across sites as uncertainty increases. We then illustrate our findings using an application to land protection investments in southern Appalachia. In this biodiversity hotspot, we find risk diversification is most cost‐effective when conservation agencies face multiple uncertainties, and market uncertainty creates greater incentives to diversify risk than climate uncertainty.

Share Repurchases, Undervaluation, and Corporate Social Responsibility

This study examines how firms’ socially responsible behavior relates to the timing of their share repurchases, considering share mispricing and the resulting wealth transfer between sellers and ongoing shareholders. We hypothesize that firms with a stronger commitment to societal goals prioritize the interests of all stakeholders more equally than those with a weaker commitment. Therefore, their managers are less likely to take advantage of the wealth transfer from selling to ongoing shareholders, which occurs when the firm is undervalued. Our results show that firms with higher corporate social responsibility (CSR) engagement, ceteris paribus, announce repurchases during periods of lower undervaluation. Additional analyses show that this effect is more pronounced when investor protection is stronger at the country level. Moreover, higher institutional ownership increases the relevance of undervaluation in buyback decisions and the distribution of excess cash is a relatively more important reason for share repurchases when firms display higher CSR engagement. Overall, our findings demonstrate that firms that generally act in a socially responsible manner also refrain from exploiting sellers for the benefit of ongoing investors. JEL classification: G15, G35, M14

الأخطاء غير المقصودة في أعمال الوسيط المالي: رؤية مقارنة بين الفقه والنظام السعودي

This research examines the unintentional errors of financial intermediaries in the Saudi market through a comparative study between Islamic jurisprudence and Saudi regulations. It aims to highlight the nature of these errors, their types, and the criteria for determining them. It also aims to analyze their effects on contracts and financial transactions and associated compensation mechanisms. The research reviews the legal and jurisprudential framework for dealing with these errors, focusing on the position of the Saudi system and its jurisprudential adaptation, and cases of exemption from liability. It discusses clients' rights and financial intermediary obligations in cases of unintentional error, addressing investor protection mechanisms and preventive measures to prevent these errors. The significance of the research lies in providing an integrated framework for dealing with unintentional errors in financial intermediation, focusing on due compensation and assessment methods, and legal and jurisprudential protection for investors. The research concludes with findings and recommendations aimed at developing professional practices in financial intermediation, enhancing financial stability, and protecting the rights of market participants.

Investment structuring and re-structuring: the Italian perspective

Abstract The multiplication of international investment treaties provides foreign investors with a valuable network to obtain and/or maximize investment protection through investment structuring and/or re-structuring (also known as nationality planning). When selecting the most appropriate treaty for structuring and/or re-structuring its investment, an investor should carry out a case-by-case assessment including on the basis of the following factors: (i) the requirements to access investment protection; (ii) the degree of the substantive and procedural protections; (iii) the timing of the re-structuring; and (iv) the overall language of the chosen treaty. Against this background, the article analyses each of the foregoing factors through the lens of the bilateral investment treaties concluded by Italy, as well as the case law involving Italian investors as claimants and/or Italy as respondent. The analysis shows that foreign investors should take into consideration the Italian network of bilateral investment treaties for investment structuring and/or re-structuring purposes since most of these treaties provide for advantageous jurisdictional requirements, as well as effective substantive and procedural protections.

Does the green financial policy promote growth quality? Evidence from China

ABSTRACT The deterioration of the pollution problem has heightened the focus on growth quality. However, the relationship between green financial policies and growth quality remains underexplored. This study aims to investigate the causal relationship between China’s green credit policy and growth quality, measured through improvements in urban green total factor productivity (GTFP). To achieve this, we employ a Difference-in-Differences (DID) model, treating the implementation of China’s green credit policy in 2007 as an almost ideal quasi-natural experiment. The empirical findings reveal that (1) the green credit policy has contributed to the improvement of urban GTFP, (2) this positive effect is more pronounced in cities with higher fixed asset investment ratio, abundant educational resources and advanced financial development and (3) the promoting effect is primarily driven by three mechanisms: the upgrading of industrial structure, the driving force of innovations and the increase in environmental protection investment. Overall, this study reveals the micro mechanism behind the positive influence of green financial policies on growth quality. Accordingly, we provide policy-makers of developing countries with valuable insights into tailoring effective strategies for long-term economic development.

Green finance and “greenization” of enterprise’s technology: based on evolutionary game theory and empirical test in China

ABSTRACT Green innovation emerges as a pivotal breakthrough for expediting the shift towards a sustainable green development model. Green Finance Reform and Innovation Pilot Zones (GFRIPZ), functioning as a comprehensive policy initiative, harness diverse policy instruments to catalyse the green transformation of enterprises. Constructing a tripartite game model (government, banks, enterprises), this study sheds light on the green evolution of enterprises’ strategic behaviour with the incentive of GFRIPZ, and explains the underlying mechanism of green finance for green innovation. Data of Chinese listed companies (2007–2019) are used to test the mechanism and specific effect of green finance with the difference-in-differences method. The findings reveal that green finance effectively promotes enterprises’ adoption of green innovation strategies. The mechanism appears to be that green finance promotes green innovation by increasing environmental protection investment, reducing financing constraints and improving total factor productivity. Meanwhile, enterprise digitization and industry-finance integration play a positive synergistic role in connecting green finance and green innovation. Besides, the promoting effect of green finance on green innovation in large, non-polluting and mature enterprises is more prominent relative to that in others. This study elucidates the micro-mechanisms underlying green finance system design that foster green innovation and achieve high-quality economic development.

Green finance and ESG performance of enterprises: Evidence from Green Finance Reform and Innovation Pilot Zone

ABSTRACT Corporate ESG performance holds a critical role in driving the shift towards sustainable production. Green finance promotes the green transformation of enterprises by altering the allocation of financial resources, which plays a crucial role in enhancing corporate ESG performance. Based on data from Chinese listed companies between 2012 and 2020, this study innovatively employs the triple difference methodology to explore the impact of the Green Finance Reform and Innovation Pilot Zones (GFRI) policy on the ESG performance of heavily polluting enterprises. Our findings reveal a significant improvement in ESG performance, especially in environmental protection and social responsibility scores. Mechanism tests reveal that GFRI policy enhances ESG performance by promoting green innovation, increasing investment in environmental protection, and reducing agency costs. For state-owned enterprises and enterprises whose CEO has environmental protection experience, GFRI policy has a greater promotion effect on ESG performance. Furthermore, GFRI policy has stronger effects in regions with stringent environmental regulations and on companies in growth and maturity stages. We further provide new theoretical explanations and empirical evidence for the green transformation of economic development in developing countries.

Growth-tolerance tradeoffs shape the survival outcomes and ecophysiological strategies of Atlantic Forest species in the rehabilitation of mining-impacted sites.

The initial performance of seedlings of tree species from different functional groups, regarding the growth-defense tradeoff, might determine its long-term success during the rehabilitation of mining areas. We monitored the field performance of six native tree species of the Atlantic Forest in the Fundão dam tailing that has been under rehabilitation for 35months. Additionally, we explored the morphophysiological traits driving the superior performance of three species. The study examined the survival strategies of pioneer species (Anadenanthera colubrina, Bixa orellana, Peltophorum dubium) and secondary species (Cedrela fissilis, Handroanthus impetiginosus, Handroanthus serratifolius), as well as the photosynthetic, nutritional, and antioxidant metabolism of the successful species. Most species accumulated excessive Fe in their leaves, except for the pioneer species A. colubrina and P. dubium. However, the nutritional status of the plants, concerning leaf nutrient concentration, was adequate for their growth in the waste. The species A. colubrina, C. fissilis, and H. serratifolius exhibited poor physiological performance, primarily due to substrate compaction and excessive foliar metal concentrations. The successful performance of P. dubium was attributed to avoidance mechanisms, allowing a cost-effective growth-defense tradeoff, thus maintaining photosynthetic efficiency at the expense of energy investment in antioxidant protection. The excess Fe allocation in the photosynthetic tissues of B. orellana was linked to a greater investment in antioxidant metabolism, which was related to the protection of the photosynthetic machinery. The Fe hyperaccumulation in H. impetiginosus led to increased oxidative damage, which was mitigated by investments in tolerance mechanisms, including photosynthetic adjustments (stomatal limitation, non-photochemical energy dissipation), as well as the activation of the enzymatic antioxidant system. The persistence and success of the Atlantic Forest tree species were not related to their ecological successional classification. Instead, it was the different mechanisms of tolerance and avoidance that allowed both pioneer and secondary species to thrive in the impacted area.

The Impact of the River Chief System on Corporate ESG Performance: Evidence from China

This paper takes the implementation of the River Chief System (RCS) as a case study representing government-led environmental governance policies. Based on the sample of 11,654 observations of Chinese A-share-listed companies spanning the years 2009 to 2021, it empirically examines the effect of the RCS on corporate Environmental, Social, and Governance (ESG) performance and the macro- and micro-mechanisms utilizing a staggered Difference-in-Differences (DID) model, controlling for companies’ financial and organizational structure characteristic variables, cities’ economic characteristic variables, and firm-year two-way fixed effects. The results indicate that the implementation of the RCS significantly enhances corporate ESG performance, a conclusion supported by various robustness checks such as the parallel trend test and placebo test. Further investigation reveals that implementing the RCS, at the micro level, boosts corporate green technology innovation, increases environmental protection investment, and, at the macro level, heightens public environmental attention, thus improving corporate ESG performance. Heterogeneity analysis finds that the RCS has a more pronounced impact on enhancing ESG performance for enterprises in central and western regions of China, state-owned enterprises, enterprises with political connections, and enterprises in mature and declining stages. These research findings of this paper provide valuable insights for local governments seeking to enhance the RCS, enrich environmental governance frameworks, and facilitate corporate green transformation.

Advancing Asset Tokenization in the European Union and Latvia: A Regulatory and Policy Perspective

Our study examines the regulatory challenges and opportunities of asset tokenization within the context of the European Union (EU), emphasizing the balance between technological innovation and investor protection in the digital economy. Focusing on 2023 EU Markets in Crypto-Assets Regulation and its application in Latvia, we utilize comparative legal and integrative literature review methodologies to explore how regulatory frameworks can enhance investor accessibility, liquidity, and transparency in digital transactions. Our findings emphasize the importance of strong legal frameworks in promoting economic growth and protecting investors, thereby contributing to a more inclusive financial ecosystem. By examining the regulatory landscape for distributed ledger technology, we provide insights into how regulations can balance innovation in asset management with the imperative of investor protection. We offer a broad analysis of the intersection between legal frameworks and technological advancements in Latvia, illustrating how diverse regulatory approaches can support both economic development and investor interests. Our research originality lies in its focus on the EU’s regulatory diversity, particularly in Latvia, and its implications for broader European and international regulatory environments. Our study contributes to ongoing discussions on optimizing regulatory strategies to facilitate secure and advantageous financial technologies, reflecting the diversity of legal and economic approaches across Europe.

An Analysis the Arbitration (International Investment Disputes) Act, 2011 with Reference to the Protection of Foreign Investors in Pakistan

The Arbitration (International Investment Disputes) Act, 2011 and its relevance in safeguarding foreign investors in Pakistan. They cover the role of the legal systems as instruments for determining the investment disputes in order to enhance the secure investment environment. It also seeks to investigate the effects of the changed law on the protection of foreign investors in Pakistan. As for the method of conducting the work, the study relies on the decisions made within the doctrinal legal research approach, and the analysis of the legislation, the case law, and the articles on Arbitration Act. This approach assists in critically evaluating a number of aspects the practical and theoretical in this case. According to the research evidence presented herein, the Arbitration Act offers adequate legal shelter with an effective legal provision addressing the concerns of the investors while giving them a fair shot at uncontaminated arbitrations as envisaged by the legislation. Nonetheless, it suffers from constraints including enforcement delays, and inadequate transparency levels. On the basis of the findings of the given study, it is possible to name the following directions of the improvement of legislation: The efficiency of enforcement of arbitral awards should be increased and the transparency of the arbitration procedures should be enhanced. Any steps towards rectifying these problems may also improve legal environment of foreign investment in Pakistan. As it emerges from this research, although the Arbitration Act, 2011 provides the framework needed in safeguarding foreign investor in Pakistan, there is a need to make practical changes so as to focus on enforcing arbitral awards and increase the degree of transparency of the arbitral process. The study is also confined by scarcity of systematic empirical evidence on the actual experiences of arbitration under the Act. It is therefore necessary to do further research on the main topic of the enforcement of arbitral awards and investor perceptions to fill the current research gap.

Perlindungan Hukum terhadap Investor Perumahan Terkait Alih Fungsi Lahan Sawah yang Dilindungi di Kabupaten Serang

The logical consequence for a growing city is an increase in population and shrinkage of rice fields and forests which are being converted into industry and residential areas. The Integrated Team for Controlling the Conversion of Rice Land in Serang Regency noted that there had been a reduction in rice fields covering an area of ​​15 thousand hectares from 2019 to 2022 in the Serang Regency area. This research was carried out to answer research questions regarding the concept of legal protection for housing investors in the transition of the function of rice fields in Serang Regency and how the provisions for the conversion of protected rice fields in Serang Regency are implemented. This research is normative juridical research using a statutory approach, a conceptual approach and an analytical approach. Data collection techniques were obtained by means of library research and data analysis using descriptive qualitative analysis. The results of this research are that currently there is no protection for investors regarding the legal conversion of protected rice fields. Rice fields which are then converted into residential land cannot be legally defined as ownership rights by the community because they stand on protected rice fields. Investors do not get transparent access regarding mapping of protected rice fields in Serang district, while the business licensing process has been issued and can be operated by housing investors.

Comply-or-explain regulation and investor protection

Comply-or-explain regulation and investor protection

Does a not-for-profit minority institutional shareholder promote corporate green innovation? A quasi-Natural experiment.

In 2016, the China Securities Regulatory Commission authorized the China Securities Investor Services Center (CSISC), a not-for-profit institution, to buy and hold 100 shares of listed firms in pilot regions. Exploiting CSISC shareholding as an exogenous shock, we employ a difference-in-differences analysis of a sample of listed firms from to 2013-2017 to investigate whether CSISC shareholding can promote corporate green innovation. Our results show that CSISC shareholding play a significant role in promoting corporate green innovation. Channel tests indicate that CSISC shareholding can promote corporate green innovation by mitigating information asymmetry and alleviating agency conflicts. Our additional analyses reveal that corporate governance can moderate the impact of CSISC shareholding on green innovation, and CSISC shareholding has different impacts on green invention patents and green utility model patents. Our additional analyses also report that the difference in corporate green innovation between the treatment and control groups diminishes after implementing CSISC shareholding nationwide. Our findings contribute to the literature on the economic consequences of CSISC shareholding and extend the literature on the determinants of corporate green innovation in investor protection.

Study on current climate change issues and response strategies

Today, human activities are generating massive emissions of greenhouse gases, intensifying the issue of global climate change. This paper provides a comprehensive analysis of the current situation, impacts, and response strategies related to climate change. It also discusses the influences of climate change on agricultural production, socio-economic systems, and human health. Global warming, primarily caused by human-induced greenhouse gas emissions, has intensified due to feedback effects. Frequent extreme weather events and significant changes in ecosystems have profoundly affected agricultural production, socio-economic systems, and human health. To tackle climate change, mitigation and adaptation approaches are suggested, including the development of clean energy, ecosystem conservation, technological innovation, and policy support. It emphasizes the importance of international cooperation and points out that enhancing public education and participation is key to addressing climate change. In the future, global attention to and research on climate change must be continuously strengthened, and response strategies need to be constantly improved. Nations should further increase their investments in clean energy development, ecosystem protection, and technological innovation, faithfully fulfil international cooperation agreements, and jointly work to slow down the pace of climate change.

Willingness to pay for blue-green space and koala habitat protection following a Covid-19 versus bushfire experimental prime

Abstract Community-supported investment in blue-green space and fauna habitat protection is important, yet the drivers of willingness to pay (WTP) are poorly understood. Moreover, research on WTP for environmental services rarely considers the role of context in determining which services donors prefer. We address these gaps with a novel experimental approach (N = 360), randomly assigning participants to a condition priming either Covid19, the Australian 2019–2020 bushfires, or to one of two control conditions. We measured subsequent WTP for blue-green space and koala habitat, finding mostly non-significant effects for experimental condition on WTP, preparedness to donate, or the importance placed on investment. Both WTP for blue-green space and koala habitat was significantly associated with experience with bushfire, left-leaning political orientation, and higher blue-green space usage. Assessment of WTP for blue-green space in Australian cities indicates a positive attitude, especially among active users, although people are still willing to contribute to koala protection.