Law Commons^™

Specific Investment: Explaining Anomalies In Corporate Law, Margaret M. Blair, Lynn A. Stout

Lynn A. Stout

This Article has two goals: to praise Professor Robert Clark as a remarkable corporate scholar, and to explore how his work has helped to advance our understanding of corporations and corporate law. Clark wrote his classic treatise at a time when corporate scholarship was dominated by a principal-agent paradigm that viewed shareholders as the principals or sole residual claimants in public corporations and treated directors as shareholders' agents. This view naturally led contemporary scholars to believe that the chief economic problem of interest in corporate law was the "agency cost" problem of getting corporate directors to do what shareholders wanted …

Stimulating Long-Term Shareholding, Emeka Duruigbo

Emeka Duruigbo

This article answers, in the affirmative, two core research questions: do we need long-term shareholders and can we find them? The economy needs long-term shareholders to provide prudent and profitable patient capital, generate an antidote to corporate short-termism and spearhead managerial accountability. Finding these shareholders requires a structure that provides the right environment and incentives for such investment. The article presents a novel application of the trust fund theory – the dominant philosophical paradigm of American corporate finance in the 19th century - as a vehicle for stimulating long-term shareholding. The central features of the reformulated trust fund theory include …

Judges Who Settle, Hillary A. Sale

Hillary A Sale

This Article develops a construct of judges as gatekeepers in corporate and securities litigation, focusing on the last-period, or settlement stage of the cases. Many accounts of corporate scandals have focused on gatekeepers and the roles they played or, in some cases, abdicated. Corporate gatekeepers, like investment bankers, accountants, and lawyers, function as enablers and monitors. They facilitate transactions and enable corporate actors to access the financial and securities markets. Without them the transactions would not happen. In class actions and derivative litigation, judges are the monitors and enablers. They are required to oversee the litigation arising from bad transactions …

Debt As Venture Capital, Darian M. Ibrahim

Darian M Ibrahim

Venture debt, or loans to rapid-growth start-ups, is a puzzle. How are start-ups with no track records, positive cash flows, tangible collateral, or personal guarantees from entrepreneurs able to attract billions of dollars in loans each year? And why do start-ups take on debt rather than rely exclusively on equity investments from angel investors and venture capitalists (VCs), as well-known capital structure theories from corporate finance would seem to predict in this context? Using hand-collected interview data and theoretical contributions from finance, economics, and law, this Article solves the puzzle of venture debt by revealing that a start-up’s VC backing …

Effects Of Strategic Tax Behaviors On Corporate Governance, Nicola Sartori

Nicola Sartori

This paper addresses agency tensions and conflicts that may emerge between managers (agents) and shareholders (principals) as a result of aggressive tax planning strategies adopted by publicly held corporations. The interactions between corporate governance and taxation are bilateral and biunique: in fact, on one side, the manner in which corporate governance rules are structured affects the way a corporation fulfills its tax obligations; on the other side, the way tax designs (from the government perspective) and related tax strategies (from the corporation perspective) are planned influences corporate governance dynamics. This article investigates such bilateral relationship limiting the analysis to the …

Deconstructing Equity: Public Ownership, Agency Costs, And Complete Capital Markets, Ronald J. Gilson, Charles K. Whitehead

Charles K Whitehead

Conflicting Ideologies Of Group Litigation: Who May Challenge Settlements In Class Actions And Derivative Suits?, Susanna Ripken

Susanna K. Ripken

The article discusses the rights of unnamed class members in class actions and shareholders in corporate derivative suits to appeal court orders approving the settlement of their claims. As representative actions, class actions and derivative suits by definition necessarily determine the rights and duties of absent parties. Unnamed class members and shareholders must rely on the named plaintiff representative to protect their interests, especially when the case is settled prior to a judgment on the merits. The federal courts are sharply divided over the question whether absent parties who are dissatisfied with the class action or derivative suit settlement may …