Work Package (WP) 4: Corporate Form

WP Leader: Copenhagen Business School, Duncan Wigan

Other Partners: City University London

Objectives:

  • Assess whether firms re-organise corporate structures to protect reputational capital and increase regulatory certainty or restructure so as to meet formal regulatory requirements, but maintain competitive advantages via tax minimization in a process known as ‘creative compliance’.
  • Assess the role of expert networks in guiding this process of adaptation in corporate form.

Description of work:

  • To achieve the first goal WP4 focuses on change in corporate structures driven by regulatory and policy innovations, such as Country-by- Country Reporting, controlled foreign corporation rules, new definitions of substance, concepts of risk, rules on permanent establishment and on-going EU state aid investigations. The team tracks the evolution of corporate form by mapping a select number of firm structures in Europe and beyond. These maps constitute metrics of regulatory impact and identify specific impacts on processes of adaptation. Sectors examined include technology, financial services, and retail. We assess whether firms simplify in the face of regulatory intervention or innovate new corporate forms which enable compliance and low levels of fiscal exposure.
  • The second goal is to assess the role and impact of expert networks on processes of adaptation to corporate forms. It identifies at the micro level the assumed purveyors of corporate forms and traces the expert networks through which information and knowledge about how to navigate radical regulatory change is communicated. WP4 will provide information on the professional and organizational networks behind system evolution and rebalancing to address the issue of how system evolution is constructed at the level of expert consensus and contestation. The research here reveals ties between different expert networks and corporate forms, as well as jurisdictional contexts in which this plays out.

Summary:

WP4 focuses on change in corporate structures driven by regulatory and policy innovations, such as Country-by- Country Reporting, controlled foreign corporation rules, new definitions of substance, concepts of risk, rules on permanent establishment and on-going EU state aid investigations. We hypothesise that firms will re-organise corporate structures to protect reputational capital and increase regulatory certainty in face of such radical regulatory innovations. As regulatory innovation increases the potential costs of extant mechanisms of fiscal arbitrage, firms will be motivated to restructure the myriad subsidiaries, special purpose vehicles and financial conduits through which they seek to optimize performance. This restructuring may take the form of simplification and we will see firms closing entities and reallocating functions to comply. However, it may equally be that firms restructure in such a way as to meet formal regulatory requirements, but maintain competitive advantages that are a function of a process known as ‘creative compliance’. Case selection is based on sectoral coverage, with firms chosen in the financial, technology, and retail sectors.

Click here for deliverables