Impact case study database

The Doing Business Reports are highly relevant for the World Bank’s decisions about investment and development aid. The World Bank’s International Finance Corporation (IFC) invests more than USD19,000,000,000 per year in private businesses in developing countries. A recent observational study also found that a country that implements reforms initiated by the Doing Business Reports receives more funds than otherwise [E1] and a recent survey experiment also established that the rankings of the Doing Business Reports shape the views of investors as regards investment opportunities **[E1]**Since the ratings and rankings of the Doing Business Reports are freely available online, there is also evidence that other private and public lenders, donors and investors take them into account [E1]. Moreover, the Doing Business Reports function as a general global benchmark of what are regarded good rules for doing business; thus, many countries are concerned about their rankings and change their laws accordingly (e.g., for Singapore and Georgia: [E1], **[E1]**) and/or establish reform committees that consider the Doing Business Reports ( **[E1]**).

‘Dear M Siems […] we are reaching out to you regarding the Protecting Minority Investors indicator, an imperfect and limited measure of corporate governance and ease of shareholder litigation, derived as you know from now outdated work by Shleifer, Djankov, La Porta and Lopez-de-Silanes. At the same time, because of its resonance with policy-makers, the Doing Business indicators on corporate and securities regulations remain a powerful tool of change and adoption of sound corporate governance principles in a very large array of jurisdictions around the world.’ (see [E3] for the full email exchange).

Drawing directly from his ‘index of shareholder protection’ (see section 1, above), Siems offered advice to the World Bank about the way the ‘protecting minority investors’ index could be improved. Based on this advice, the World Bank implemented 11 changes of this index. In detail, (i) two of those changes initiated by Siems are general ones, namely that the guidance clarifies now that stock exchange-listing rule are also considered as a source of law and whether variables should code the law of private or public companies. (ii) Two specific changes concern the introduction of new variables that derive from Siems’ shareholder protection index: the revised version of the World Bank’s index now includes a variable on the topic ‘Does the sale of 51% of Buyer's assets require approval of shareholders?’ which directly derives from the first variable of Siems’ research (see the definition in section 1, above); the other new variable is the one asking ‘Can shareholders who hold 5% of Buyer’s share capital put items on the general meeting agenda?’ and it derives from the second variable of Siems’ index. (iii) The remaining seven specific changes concern various details of the definitions of the variables.

All these changes and the impact of Siems’ advice are shown in the sources to corroborate the impact, notably his email-correspondence with the World Bank and the track-changed version of the World Bank’s revised index [E3], [E4]. Specifically, in an email from 11 February 2015, the World Bank wrote to Siems:

‘Dear Mathias, Many thanks again for your interest, inputs and support, and apologies for the delay. As you can see in the sample questionnaire (with preliminary UK data), we were able to incorporate several of your recommendations. In particular, we have added questions you have suggested from your index’ […] [referring specifically to the new variables on ‘de facto changes’ and ‘agenda setting’ as well as to five of the modified variables and further possible changes] (see [E3] for full email).

Research by Siems was also cited approvingly in the narrative text of the 2016 and 2017 versions of the Doing Business Report where the World Bank explained the general need to strengthen shareholder protection [E2], [E2]. The changes to the 2016 report initiated by Siems have been retained in the Doing Business Reports of the subsequent years.

These changes initiated by Siems had a direct impact on the World Bank’s approach to measuring the strength of shareholder protection. As the research by Siems is based on an advanced coding scheme (see Section 2, above), this revised index therefore provides more reliable information on which the Word Bank can make its investment decisions (see A, above).

Specifically, the changes initiated by Siems in the revised index made a considerable difference for the rating and ranking of many countries concerning their position as regards the strength of ‘protecting minority investors’. As the Doing Business Report 2016 re-calculated the 2015 data based on the revised index of measuring shareholder protection, it is possible to compare how far the scores of all 189 countries have changed due to this revision. It can be seen that the changes are considerable: some countries have changed upwards of up to 65 country ranks in this category and some downwards of up to 52 country ranks [E5].

It can also be shown that the changes of the ‘protecting minority investors’ index initiated by Siems have led to changes in state legislations. The World Bank tracks legal reforms responding to the Doing Business Reports which shows that there were 36 countries with reforms in the field of ‘protecting minority investors’ in 2017 or 2018 [E2]. In the preparatory legislative documents, France, Morocco and India explicitly referred to the Doing Business Report as a justification for their law reforms (see [E6] for details); thus, given that Siems initiated two general changes in the index (see above), Siems’ research has had proven impact on the law reforms in these countries. Furthermore, 20 of the other countries also changed their rules for at least one of the more specific changes initiated by Siems concerning questions addressed by ‘protecting minority investors’ index (see [E6] for details).

The actual harmonisation process is now implemented in stages. In the first instance, the EU has enacted a new Directive (EU) 2019/2121 as regards cross-border conversions, mergers and divisions. The Study co-authored by Siems has contributed to this process. This Study contained detailed recommendations on cross-border conversions [output 6 at pp. 331-345 as ‘reincorporations’], including the suggestion that this area of law should be addressed by a new EU directive. The EU then also commissioned a further study on this topic by the consultancy company Ernst & Young, which also referred to the Study co-authored by Siems [E8]. In addition, the Study co-authored by Siems has an impact on an on-going EU initiative to combat ‘letterbox companies’. A document by the Secretariat of the European Parliament draws on this Study in order to identify the extent of this problem [E9]. The EU Commission subsequently appointed ICF Consulting in order to produce a further ‘Study on letterbox companies’. The Commission’s request for service of this project states explicitly that for the ‘measures taken by Member States, the EU and third countries to fight letterbox companies’ this new study ‘should take into account the study [co-authored by Siems]’ [E10]. Siems is also a senior expert of this new study and has contributed to its text.