Corporate Finance Commons^™

Corporate Crime And Punishment: An Empirical Study, Dorothy S. Lund, Natasha Sarin

All Faculty Scholarship

For many years, law and economics scholars, as well as politicians and regulators, have debated whether corporate criminal enforcement overdeters beneficial corporate activity or in the alternative, lets corporate criminals off too easily. This debate has recently expanded in its polarization: On the one hand, academics, judges, and politicians have excoriated enforcement agencies for failing to send guilty bankers to jail in the wake of the 2008 financial crisis; on the other, the U.S. Department of Justice has since relaxed policies that encouraged individual prosecutions and reduced the size of fines and number of prosecutions. A crucial and yet understudied …

Synthetic Governance, Byung Hyun Anh, Jill E. Fisch, Panos N. Patatoukas, Steven Davidoff Solomon

All Faculty Scholarship

Although securities regulation is distinct from corporate governance, the two fields have considerable substantive overlap. By increasing the transparency and efficiency of the capital markets, securities regulation can also enhance the capacity of those markets to discipline governance decisions. The importance of market discipline is heightened by the increasingly vocal debate over what constitutes “good” corporate governance.

Securities product innovation offers new tools to address this debate. The rise of index-based investing provides a market-based mechanism for selecting among governance options and evaluating their effects. Through the creation of bespoke governance index funds, asset managers can create indexes that correspond …

The New Titans Of Wall Street: A Theoretical Framework For Passive Investors, Jill E. Fisch, Asaf Hamdani, Steven Davidoff Solomon

All Faculty Scholarship

Passive investors — ETFs and index funds — are the most important development in modern day capital markets, dictating trillions of dollars in capital flows and increasingly owning much of corporate America. Neither the business model of passive funds, nor the way that they engage with their portfolio companies, however, is well understood, and misperceptions of both have led some commentators to call for passive investors to be subject to increased regulation and even disenfranchisement. Specifically, this literature takes a narrow view both of the market in which passive investors compete to manage customer funds and of passive investors’ participation …

Appraisal Arbitrage And Shareholder Value, Scott Callahan, Darius Palia, Eric L. Talley

Faculty Scholarship

Post-merger appraisal rights have been the focus of heated controversy within mergers and acquisitions circles in recent years. Traditionally perceived as an arcane and cabalistic proceeding, the appraisal action has recently come to occupy center stage through the ascendancy of appraisal arbitrage — whereby investors purchase target-company shares shortly after an announcement principally to pursue appraisal. Such strategies became more feasible and profitable a decade ago, on the heels of two seemingly technocratic reforms in Delaware: (i) the statutory codification of pre-judgment interest, pegging a presumptive rate at five percent above the federal discount rate; and (ii) the Transkaryotic opinion, …

Confronting The Peppercorn Settlement In Merger Litigation: An Empirical Analysis And A Proposal For Reform, Jill E. Fisch, Sean J. Griffith, Steven M. Davidoff

All Faculty Scholarship

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result …

Introduction To Institutional Investor Activism: Hedge Funds And Private Equity, Economics And Regulation, William W. Bratton, Joseph A. Mccahery

All Faculty Scholarship

The increase in institutional ownership of recent decades has been accompanied by an enhanced role played by institutions in monitoring companies’ corporate governance behaviour. Activist hedge funds and private equity firms have achieved a degree of success in actively shaping the business plans of target firms. They may be characterized as pursuing a common goal – in the words used in the OECD Steering Group on Corporate Governance, both seek ‘to increase the market value of their pooled capital through active engagement with individual public companies. This engagement may include demands for changes in management, the composition of the board, …

Confronting The Peppercorn Settlement In Merger Litigation: An Empirical Analysis And A Proposal For Reform, Jill E. Fisch, Sean J. Griffith, Steven M. Davidoff

Steven Davidoff Solomon

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result …

Shareholders And Social Welfare, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

This article addresses the question whether (and how) the shareholders matter for social welfare. Answers to the question have changed over time. Observers in the mid-twentieth century believed that the socio-economic characteristics of real world shareholders were highly pertinent to social welfare inquiries. But they went on to conclude that there followed no justification for catering to shareholder interest, for shareholders occupied elite social strata. The answer changed during the twentieth century’s closing decades, when observers came to accord the shareholder interest a key structural role in the enhancement of economic efficiency even as they also deemed irrelevant the characteristics …

Making Sense Of The New Financial Deal, David A. Skeel Jr.

All Faculty Scholarship

In this Essay, I assess the enactment and implications of the Dodd-Frank Act, Congress’s response to the 2008 financial crisis. To set the stage, I begin by very briefly reviewing the causes of the crisis. I then argue that the legislation has two very clear objectives. The first is to limit the risk of the shadow banking system by more carefully regulating the key instruments and institutions of contemporary finance. The second objective is to limit the damage in the event one of these giant institutions fails. While the new regulation of the instruments of contemporary finance—including clearing and exchange …