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Two factors explain why the Serbian privatization experience deserves close attention from outside world. First, Serbia's starting conditions for privatization, with a historical tradition of workers’ management, strong trade unions, and an ambivalent initial attitude toward privatization, have as much in common with circumstances surrounding privatization in the developing countries as with those in the so-called economies in transition. Second, Serbia embarked on a resolute privatization path only in 2001, following more than 10 years of diverse privatization efforts in other post-socialist economies of the region. This makes Serbia a perfect case study of how a country can learn from the experience (both positive and negative) of other reformers.

In bankruptcy, a reorganization procedure is based on the terms of a reorganization plan aimed to save a financially distressed firm. We provide an original approach of the reorganization plan that we treated as a future contract that demands to creditors a certain degree of cost sharing. This paper examines how the sharing of the reorganization plan costs influences the bankruptcy outcome of such firm.

The sharing of the costs between creditors and debtor is analyzed by a static theoretical model that uses a Lagrangian approach.

We show that debtors have strong incentives to propose reorganization plans which provide an expected gain for creditors higher than the liquidation value of the firm and lower than the payment of the reorganization plan with an optimal sharing degree. Hence, a reorganization plan can be rejected by creditors if the sharing degree is too important.

The liquidation of the firm can be avoided if the design of the reorganization plan is improved by performing an appraisal or purchasing the services of an audit company.

The novelty of this paper resides in the distinction of two types of bankruptcy legal systems. The first one represents a pro-creditor or a creditor-friendly bankruptcy system in which the claimants’ payment is not limited to a fixed value written in the reorganization plan. Conversely, we treated the case of a debtor-friendly bankruptcy system which limits the creditors’ payment. The results of our model hold independently of the bankruptcy law orientation, that is, pro-creditor or pro-debtor.

Before the September–October 2008 Financial Crisis, investment banks were hooked on debt. In 2007, a year before its failure, Lehman Brothers held equity just 3.3% of its balance sheet (that is, its debt/equity ratio well exceeded 29); virtually all the rest was financed by borrowing. Leverage is an elixir that makes profits soar when times are good but magnifies losses when the economy sours. Currently in India, several companies have seen their balance sheet out of shape because of overleverage, but banks continue to be benevolent, often forced by political interventions (see Cases 6.1 and 6.2). Most of these business groups are nearly dead, with their equity almost wiped out. There is little chance they will survive but for their banker’s largesse. Ever-greening of loans is keeping them alive, but what could be the end game? For instance, just a year before economic liberalization in India, few enterprising men invested in the steel business. They borrowed monies from the banks and banks continued to finance their operations, and now they are realizing that the promoters cannot meet with their debt obligations. The banks, however, did not want to accept financial loss and hence commonly agreed to ease the payment obligations so that the loans remained good and not degenerate to NPAs. This is tantamount to refinancing to service your loans. But now the banks overwhelmed with accumulated NPAs are trying to sell debt. How do you legally, ethically, morally, and spiritually (LEMS) justify share-market concentration in the hands of very few promoter investors? What are their long-run unintended economic, legal, ethical, and moral consequences, and why? This chapter studies this market turbulence and the role of bankruptcy laws and court systems in bringing about some change in the debt-overleveraged corporations.

Financial assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. The paper reviews the need for assurance, given the prevalence of abandoned environmental obligations, and assesses the implementation of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, assurance rules can be improved. On the whole, however, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations.

The essay points out a common thread that runs through law-and-economics business law scholarship. Working largely independently of each other, economically oriented scholars working in different areas have argued that the law should focus on the interests of a single constituency – shareholders in corporate law, creditors in bankruptcy law, and consumers in antitrust law. Economic analysts thus have rejected arguments advanced by “progressive” scholars working in each of these areas that the law should instead concern itself with the full range of constituencies affected by business activity. The law-and-economics single constituency claim rests in part on skepticism about judicial competence, but the underlying premise is an objection to the use of law for redistributive purposes. The primary value is efficiency, defined in terms of market-generated outcomes. It is argued here that this political commitment implies a strong tendency toward maintenance of the existing distribution of wealth, and that even more importantly, the single constituency claim may actually have redistributive implications. In each of these areas of business law, however, a regressive program favors owners of capital against those who are generally less well off, such as workers and small-business owners.

The Malaysian economy is expected to face another tumultuous year in 2019. It has been reported more than 21,000 people lost their jobs in 2018, half of whom were in Selangor and Kuala Lumpur. This rising unemployment gravely affects a person’s source of income, particularly when he/she is the sole breadwinner of the family. It further leads to the inability to pay one’s monthly commitments such as home, personal and car financing. Notwithstanding the above situation, Sharīʿah encourages leniency on the part of the creditor, that is, when the debtor is in a difficulty, to grant him/her time until it is easy for him/her to pay. Nonetheless, in Malaysia, the inability to pay debt or non-performing loan/financing entitles the financial institutions (both conventional banks and Islamic financial institutions) to proceed with legal proceedings in civil court It is trite that Islamic financing in Malaysia is governed by Sharīʿah principles and legislations, which are conventional in nature; and contractual rights and duties involving Islamic finance are enforceable in the civil court of law. This chapter examines procedural laws governing the event of default of Islamic financing in Malaysia. The methodology adopted in this chapter is doctrinal legal analysis whereby the relevant laws, namely, Rules of Court 2012, Insolvency Act 1967, Limitation Act 1953, Evidence Act 1950, Court of Judicature Act 1964 and the National Land Code 1965 are analysed in addition to the relevant case law. The study reveals that while some of the provisions are sufficient to regulate the event of default of Islamic financing, the laws are largely inadequate. The chapter also finds a significant number of legal issues and challenges relating to event of default in Islamic financing, which require legal reform.

The Lockheed scandal was exposed during the 4 February 1976 hearings of the Sub-Committee on Multinational Corporations of the United States Senate Committee on Foreign Relations. These hearings revealed that Lockheed Aircraft Corporation paid illegal payments in several countries including Japan to promote the sale of its planes to prevent bankruptcy. The Securities Exchange Commission obtained documents showing that Lockheed paid more than US$10 million to Yoshio Kodama, a “fixer” and Lockheed's secret representative, and the Marubeni Corporation, which was Lockheed's agent in Japan since 1959. During the same hearings on 6 February, A. Carl Kotchian, vice president of Lockheed, informed the committee that a senior Japanese government official received US$2 million from Marubeni and that his company relied on Kenji Osano, a close associate of former Prime Minister Kakuei Tanaka, as an intermediary in its efforts to sell 21 Lockheed's L-1001 Tristar airbuses to All Nippon Airways (ANA) (Macdougall, 1988, pp. 193–195).

This paper questions the issue of the dynamics of corporate governance in Japan using a conceptual framework adapted from North’s theory of institutional change. National systems of corporate governance can indeed be considered a particular case of institutions. We thus suggest transposing North’s propositions about institutional change to national systems of corporate governance. As an illustration for our propositions, we choose to use a case study: the so-called Sogo crisis. The Sogo group is a Japanese chain of department stores, which has encountered financial problems in the late 1990s. The handling of those difficulties by the firm’s main stakeholders highlights both the recent changes in the Japanese system of corporate governance and the resistance opposed to them.

The long-term financial stability of hospital systems represents a “grand challenge” in health care. New ownership forms, such as private equity (PE), promise to achieve better financial performance than nonprofit or for-profit systems. In this study, we compare two systems with many similarities, but radically different ownership structures, missions, governance, and merger and acquisition (M&A) strategies. Both were nonprofit, religious systems serving low-income communities – Montefiore Health System and Caritas Christi Health Care.

Montefiore's M&A strategy was to invest in local hospitals and create an integrated regional system, increasing revenues by adding primary doctors and community hospitals as feeders into the system and achieving efficiencies through effective resource allocation across specialized units. Slow and steady timing of acquisitions allowed for organizational learning and balancing of debt and equity. By 2019, it owned 11 hospitals with 40,000 employees and had strong positive financials and low reliance on debt.

By contrast, in 2010, PE firm Cerberus Capital bought out Caritas (renamed Steward Health Care System) and took control of the Board of Directors, who set the system's strategic direction. Cerberus used Steward as a platform for a massive debt-driven acquisition strategy. In 2016, it sold off most of its hospitals’ property for $1.25 billion, leaving hospitals saddled with long-term inflated leases; paid itself almost $500 million in dividends; and used the rest for leveraged buyouts of 27 hospitals in 9 states in 3 years. The rapid, scattershot M&A strategy was designed to create a large corporation that could be sold off in five years for financial gain – not for health care integration. Its debt load exploded, and by 2019, its financials were deeply in the red. Its Massachusetts hospitals were the worst financial performers of any system in the state. Cerberus exited Steward in 2020 in a deal that left its physicians, the new owners, holding the debt.

While the trade sector has long been the backbone of growth followed by real estate development in Dubai, the impact of reduced oil revenues in the Gulf Cooperation Council (GCC) has affected Dubai. GCC countries have identified innovation and transitioning to a knowledge-based economy as critical components of sustainable growth in the post-oil world. The purpose of this chapter is twofold: (1) to examine UAE’s competitiveness relative to four economies for which we can draw meaningful conclusions (Qatar, Singapore, Norway, and Switzerland) and (2) to integrate macro- and micro-level findings in an actionable framework. Using the composite Knowledge Economy Index (KEI) developed by the World Bank (2008, 2012), we conclude that UAE should prioritize three key areas to ­transition to a knowledge-based economy: the regulatory regime, innovation, and human capital. These findings are consistent with a recent study by the UAE Department of Economic Development/INSEAD, which highlights two areas that need addressing: “Creation” (knowledge creation) and “Anchoring” (institutional environment for innovation). We integrate these macro-level findings with research at the innovation ecosystem level (and particularly survey-based research completed by Wamda Research Lab) to propose a comprehensive action framework across all ecosystem stakeholders (i.e., government, entrepreneurs, academia, support ecosystem, and corporates). The action matrix allows individual stakeholders to drive corresponding actions and prioritize across short- and long-term initiatives.