Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 17 of 17
Full-Text Articles in Law
The Rise Of Private Equity Continuation Funds, Kobi Kastiel, Yaron Nili
The Rise Of Private Equity Continuation Funds, Kobi Kastiel, Yaron Nili
Faculty Scholarship
This Article provides the first comprehensive examination of an emerging practice within the private equity sector: continuation funds. Continuation funds break from the traditional private equity model by allowing sponsors to hold on to assets beyond the typical fund term and, instead of selling the assets to third parties, sell them to their own newly established fund. Lauded by the private equity industry as providing “optionality” to investors by allowing them to cash out or roll over, continuation funds have grown to represent a major segment of investment activity in the United States. Despite their surging popularity among private equity …
A Revised Monitoring Model Confronts Today's Movement Toward Managerialism, James D. Cox, Randall S. Thomas
A Revised Monitoring Model Confronts Today's Movement Toward Managerialism, James D. Cox, Randall S. Thomas
Faculty Scholarship
There are many lessons to be drawn from the sweep of history. In law, the compelling story repeatedly told is the observable co-movement of law on the one hand, and economic, social, and political changes on the other hand. Aberrations, however, do arise but generally do not persist in the long term. Contemporary corporate law seems to be on the cusp of such an abnormality as legal developments and proposed reforms for corporate law are currently conflicting with the direction in which the host environment is moving. This article identifies a series of contemporary judicial and regulatory corporate governance developments …
The Giant Shadow Of Corporate Gadflies, Kobi Kastiel, Yaron Nili
The Giant Shadow Of Corporate Gadflies, Kobi Kastiel, Yaron Nili
Faculty Scholarship
Modern-day shareholders influence corporate America more than ever before. From demanding greater accountability of executives to lobbying for a variety of social and environmental policies, shareholders today have the power to alter how American companies are run. Amazingly, a small group of individual shareholders wields unprecedented power to set corporate agendas and stands at the epicenter of our contemporary corporate governance ecosystem. In fact, the power of these individuals, known as “corporate gadflies,” continues to rise.
Corporate gadflies present a puzzling reality. Although public corporations in the United States are increasingly owned by large institutional investors, much of their corporate …
Tepoel Lecture: Bond Trustees And The Rising Challenge Of Activist Investors, Steven L. Schwarcz
Tepoel Lecture: Bond Trustees And The Rising Challenge Of Activist Investors, Steven L. Schwarcz
Faculty Scholarship
No abstract provided.
Beyond The Numbers: Substantive Gender Diversity In Boardrooms, Yaron Nili
Beyond The Numbers: Substantive Gender Diversity In Boardrooms, Yaron Nili
Faculty Scholarship
No abstract provided.
Revolving Elites: The Unexplored Risk Of Capturing The Sec, James D. Cox, Randall S. Thomas
Revolving Elites: The Unexplored Risk Of Capturing The Sec, James D. Cox, Randall S. Thomas
Faculty Scholarship
Fears have abounded for years that the sweet spot for capture of regulatory agencies is the "revolving door" whereby civil servants migrate from their roles as regulators to private industry. Recent scholarship on this topic has examined whether America's watchdog for securities markets, the Securities and Exchange Commission (SEC), is hobbled by the long-standing practices of its enforcement staff exiting their jobs at the Commission and migrating to lucrative private sector employment where they represent those they once regulated. The research to date has been inconclusive on whether staff revolving door practices have weakened the SEC' s verve. In this …
The Enduring Distinction Between Business Entities And Security Interests, Ofer Eldar, Andrew Verstein
The Enduring Distinction Between Business Entities And Security Interests, Ofer Eldar, Andrew Verstein
Faculty Scholarship
What are business entities for? What are security interests for? The prevailing answer in legal scholarship is that both bodies of law exist to partition assets for the benefit of designated creditors. But if both bodies of law partition assets, then what distinguishes them? In fact, these bodies of law appear to be converging as increasing flexibility irons out any differences. Indeed, many legal products, such as securitization vehicles, insurance products known as captive insurance, and mutual funds, employ entities to create distinct asset pools. Moreover, recent legal innovations, such as “protected cells,” which were created to facilitate such products, …
Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz
Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz
Faculty Scholarship
This Article makes two arguments that, combined, demonstrate an important synergy: first, including bondholders in corporate governance could help to reduce systemic risk because bondholders are more risk averse than shareholders; second, corporate governance should include bondholders because bonds now dwarf equity as a source of corporate financing and bond prices are increasingly tied to firm performance.
Regulatory Competition And The Market For Corporate Law, Ofer Eldar, Lorenzo Magnolfi
Regulatory Competition And The Market For Corporate Law, Ofer Eldar, Lorenzo Magnolfi
Faculty Scholarship
This article develops an empirical model of firms’ choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a novel database of incorporation decisions from 1995- 2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada’s rise is due to the preferences of small firms.Our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws. Our findings support the hypothesis that …
Quieting The Sharholders' Voice: Empirical Evidence Of Pervasive Bundling In Proxy Solicitations, James D. Cox, Fabrizio Ferri, Colleen Honigsberg, Randall S. Thomas
Quieting The Sharholders' Voice: Empirical Evidence Of Pervasive Bundling In Proxy Solicitations, James D. Cox, Fabrizio Ferri, Colleen Honigsberg, Randall S. Thomas
Faculty Scholarship
The integrity of shareholder voting is critical to the legitimacy of corporate law. One threat to this process is proxy “bundling,” or the joinder of more than one separate item into a single proxy proposal. Bundling deprives shareholders of the right to convey their views on each separate matter being put to a vote and forces them to either reject the entire proposal or approve items they might not otherwise want implemented.
In this Paper, we provide the first comprehensive evaluation of the anti-bundling rules adopted by the Securities and Exchange Commission (“SEC”) in 1992. While we find that the …
Corporate Law And The Limits Of Private Ordering, James D. Cox
Corporate Law And The Limits Of Private Ordering, James D. Cox
Faculty Scholarship
Solomon-like, the Delaware legislature in 2015 split the baby by amending the Delaware General Corporation Law to authorize forum-selection bylaws and to prohibit charter or bylaw provisions that would shift to the plaintiff defense costs incurred in connection with shareholder suits that were not successfully concluded. The legislature acted after the Boilermakers Local 154 Retirement Fund. v. Chevron Corp ATP Tour, Inc. v. Deutscher Tennis Bund, broadly empowered the board vis-à-vis the shareholders through the board’s power to amend the bylaws. Repeatedly the analysis used by each court referenced the contractual relationship the shareholders had through the articles of …
Addressing Agency Costs Through Private Litigation In The U.S: Tensions, Disappointments, And Substitutes, James D. Cox, Randall S. Thomas
Addressing Agency Costs Through Private Litigation In The U.S: Tensions, Disappointments, And Substitutes, James D. Cox, Randall S. Thomas
Faculty Scholarship
Many scholars argue that over the past seventy years, shareholder representative litigation has acted as an important policing mechanism of managerial abuses at U.S. public companies. Different types of representative litigation have had their moment in the sun – derivative suits early on, followed by federal securities class actions, and most recently merger litigation – often producing benefits for shareholders, but posing difficult challenges as well. In particular, the benefits are qualified by another concern, the litigation agency costs that surround shareholder suits. This form of agency costs arises since the suits are invariably representative with no requirement that the …
The Governance Structure Of Shadow Banking, Steven L. Schwarcz
The Governance Structure Of Shadow Banking, Steven L. Schwarcz
Faculty Scholarship
No abstract provided.
The Governance Structure Of Shadow Banking: Rethinking Assumptions About Limited Liability, Steven L. Schwarcz
The Governance Structure Of Shadow Banking: Rethinking Assumptions About Limited Liability, Steven L. Schwarcz
Faculty Scholarship
In an earlier article, I argued that shadow banking — the provision of financial services and products outside of the traditional banking system, and thus without the need for bank intermediation between capital markets and the users of funds — is so radically transforming finance that regulatory scholars need to rethink their basic assumptions. This article attempts to rethink the corporate governance assumption that owners of firms should always have their liability limited to the capital they have invested. In the relatively small and decentralized firms that dominate shadow banking, equity investors tend to be active managers. Limited liability gives …
Does Board Independence Reduce The Cost Of Debt?, Michael Bradley, Dong Chen
Does Board Independence Reduce The Cost Of Debt?, Michael Bradley, Dong Chen
Faculty Scholarship
Using the passage of the Sarbanes-Oxley Act and the associated change in listing standards as a natural experiment, we find that while board independence decreases the cost of debt when credit conditions are strong or leverage low, it increases the cost of debt when credit conditions are poor or leverage high. We also document that independent directors set corporate policies that increase firm risk. These results suggest that, acting in the interest of shareholders, independent directors are increasingly costly to bondholders with the intensification of the agency conflict between these two stakeholders.
Ring-Fencing, Steven L. Schwarcz
Ring-Fencing, Steven L. Schwarcz
Faculty Scholarship
“Ring-fencing” is often touted as a regulatory solution to problems in banking, finance, public utilities, and insurance. However, both the precise meaning of ring-fencing, as well as the nature of the problems that ring-fencing regulation purports to solve, are ill defined. This article examines the functions and conceptual foundations of ring-fencing. In a regulatory context, the term can best be understood as legally deconstructing a firm in order to more optimally reallocate and reduce risk. So utilized, ring-fencing can help to protect public-benefit activities performed by private-sector firms, as well as to mitigate systemic risk and the too-big-to-fail problem inherent …
Potentially Perverse Effects Of Corporate Civil Liability, Samuel W. Buell
Potentially Perverse Effects Of Corporate Civil Liability, Samuel W. Buell
Faculty Scholarship
Inadequate civil regulatory liability can be an incentive for public enforcers to pursue criminal cases against firms. This incentive is undesirable in a scheme with overlapping forms of liability that is meant to treat most cases of wrongdoing civilly and to reserve the criminal remedy for the few most serious institutional delicts. This effect appears to exist in the current scheme of liability for securities law violations, and may be present in other regulatory structures as well. In this chapter for a volume on "Prosecutors in the Boardroom," the author argues that enhancements of the SEC's enforcement processes likely would …