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Stock-Market Law And The Accuracy Of Public Companies’ Stock Prices, Kevin S. Haeberle Jan 2015

Stock-Market Law And The Accuracy Of Public Companies’ Stock Prices, Kevin S. Haeberle

Faculty Publications

The social benefits of more accurate stock prices—that is, stock-market prices that more accurately reflect the future cash flows that companies are likely to produce—are well established. But it is also thought that market forces alone will lead to only a sub-optimal level of stock-price accuracy—a level that fails to obtain the maximum net social benefits, or wealth, that would result from a higher level. One of the principal aims of federal securities law has therefore been to increase the extent to which the stock prices of the most important companies in our economy (public companies) contain ...


Are Investors’ Gains And Losses From Securities Fraud Equal Over Time? Theory And Evidence, Alicia J. Davis Oct 2010

Are Investors’ Gains And Losses From Securities Fraud Equal Over Time? Theory And Evidence, Alicia J. Davis

Law & Economics Working Papers

Most leading securities regulation scholars argue that compensating securities fraud victims is inefficient. They maintain that because diversified investors that trade frequently are as likely to gain from trading in fraud-tainted stocks as they are to suffer harm from doing so, these investors should have no expected net losses from fraud over the long term. This assertion, which analogizes trading in fraud-tainted stocks to participating in a coin toss game in which players win $1 on heads and lose $1 on tails, is problematic for a number of reasons. First, even if we accept this analogy, probability theory holds that ...


Celebrity Ceos: Disclosure At The Intersection Of Privacy And Securities Law, Ann M. Olazábal, Patricia Sánchez Abril Apr 2010

Celebrity Ceos: Disclosure At The Intersection Of Privacy And Securities Law, Ann M. Olazábal, Patricia Sánchez Abril

Business Law Articles and Papers

An abstract for this item is not available.


Legitimacy And Corporate Law: The Case For Regulatory Redundancy, Renee M. Jones Aug 2009

Legitimacy And Corporate Law: The Case For Regulatory Redundancy, Renee M. Jones

Boston College Law School Faculty Papers

This article provides a democratic assessment of the corporate law making structure in the United States. It draws upon the basic democratic principle that those affected by legal rules should have a voice in determining the substance of those rules. Although other commentators have noted certain undemocratic aspects of corporate law, this Article is the first to present a comprehensive assessment of the corporate regulatory structure from the perspective of democracy. It departs from prior accounts by looking past the states' role to consider the ways that federal regulation shores up the legitimacy of the overarching structure. This focus on ...


The Supreme Court’S Impact On Securities Class Actions: An Empirical Assessment Of Tellabs, Adam C. Pritchard, Stephen Choi Aug 2009

The Supreme Court’S Impact On Securities Class Actions: An Empirical Assessment Of Tellabs, Adam C. Pritchard, Stephen Choi

Law & Economics Working Papers Archive: 2003-2009

Using a sample of securities fraud class actions filed between 2003 and 2007, we study the impact of a widely-followed Supreme Court decision from that period, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). This decision clarified the law with respect to one of the most hotly contested issues in securities litigation: pleading scienter. The Tellabs decision reversed a very lenient Seventh Circuit decision with respect to pleading scienter, but replaced it with a standard that is nonetheless relatively generous to plaintiffs. Looking at opinions resolving motions to dismiss decided before and after that decision, we ...


London As Delaware?, Adam C. Pritchard May 2009

London As Delaware?, Adam C. Pritchard

Law & Economics Working Papers Archive: 2003-2009

Regulatory competition has long driven the path of corporate law in the federal system of the United States. Now, jurisdictional competition has spread to exchange listings. New York took an early lead in that competition in the 1990s, but has now been overtaken by London. Can London prevail in the competition for stock listings in the long term? This essay explores that question through the insights offered by Delaware’s dominance in the market for corporate listings. Delaware has prevailed by offering corporate directors a predictable body of that credibly shields directors from the vagaries of political backlash in times ...


Direct And Derivative Claims In Securities Fraud Litigation, Richard A. Booth May 2009

Direct And Derivative Claims In Securities Fraud Litigation, Richard A. Booth

Working Paper Series

In the typical securities fraud class action under Rule 10b-5, the plaintiff class consists of buyers who seek damages equal to the difference between the price paid for the stock during the fraud period and the lower price that prevails after corrective disclosure. The argument here is that this claim is really an amalgam of direct and derivative claims and that the derivative claims should result in recovery by the corporation for the benefit of all stockholders. There are three types of losses that arise in the typical stock-drop action. First, part of the loss may be attributable to lower ...


The Failure Of Private Ordering And The Financial Crisis Of 2008, Brian J.M. Quinn Apr 2009

The Failure Of Private Ordering And The Financial Crisis Of 2008, Brian J.M. Quinn

Boston College Law School Faculty Papers

This Article analyzes the Financial Crisis of 2008 in the context of failures by market participants to engage in private ordering thus leading to opportunistic behavior at the expense of market stability. The Financial Crisis of 2008 offers a decidedly negative verdict on a decades-long project to deregulate financial markets and rely on private ordering mechanisms, including securitization and default swaps, to mitigate opportunistic behavior and improve market efficiency. Although the regulatory approach of the past two decades, which relied in great measure on private parties fending for themselves, helped to generate a number of innovations and positive developments in ...


Unentrapped, William W. Bratton Jan 2009

Unentrapped, William W. Bratton

Faculty Scholarship at Penn Law

No abstract provided.


Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga Sep 2008

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market ...


Five Decades Of Corporation Law - From Conglomeration To Equity Compensation, Richard A. Booth Apr 2008

Five Decades Of Corporation Law - From Conglomeration To Equity Compensation, Richard A. Booth

Working Paper Series

This brief essay recounts developments in corporation law over the last fifty years. It begins with the rise of finance capitalism and the conglomerate corporation which was followed by the emergence of hostile takeovers in the late 1970s and 1980s. One of the key events in this saga was the February 1, 1983 decision by the Delaware Supreme Court in Weinberger v. UOP, Inc. that effectively permitted the at-will elimination of minority stockholders through cashout mergers. Takeovers were also facilitated by two major financial developments: (1) the growth of institutional investors coupled with the growing taste of diversified investors for ...


The Use Of The Corporate Monitor In Sec Enforcement Actions, Jennifer O'Hare Feb 2008

The Use Of The Corporate Monitor In Sec Enforcement Actions, Jennifer O'Hare

Working Paper Series

This paper addresses the SEC’s recent use of the corporate monitor as ancillary relief in its enforcement actions. The corporate monitor represents the latest example of the SEC seeking to shift its enforcement responsibilities to the public companies it regulates. Focusing on the role played by the corporate monitor imposed by the SEC in its enforcement action brought against WorldCom, this paper considers some of the dangers posed by the use of the corporate monitor, such as the whether the appointment of a corporate monitor constitutes impermissible overreaching by the SEC. The paper recognizes that the corporate monitor can ...


Shareholder Primacy's Corporatist Origins: Adolf Berle And The Modern Corporation, William W. Bratton, Michael L. Wachter Jan 2008

Shareholder Primacy's Corporatist Origins: Adolf Berle And The Modern Corporation, William W. Bratton, Michael L. Wachter

Faculty Scholarship at Penn Law

No abstract provided.


Retail Investor Remedies Under Rule 10b-5, Jennifer O'Hare Oct 2007

Retail Investor Remedies Under Rule 10b-5, Jennifer O'Hare

Working Paper Series

This paper assesses the private remedies available under Rule 10b-5 to retail investors who have been defrauded by false corporate disclosures. After comparing the treatment received by retail investors to the treatment received by institutional investors, I identify several areas in which the federal securities laws disfavor retail investors who have been defrauded by false corporate disclosures, including the creation of a two-tiered system of investor remedies for securities fraud. Institutional investors are permitted to pick and choose which law and forum offers them the most attractive chance for recovery, but retail investors typically do not have this opportunity. They ...


Carrots For Vetogates: Incentive Systems To Promote Capital Market Gatekeeper Effectiveness, Lawrence A. Cunningham Apr 2007

Carrots For Vetogates: Incentive Systems To Promote Capital Market Gatekeeper Effectiveness, Lawrence A. Cunningham

Boston College Law School Faculty Papers

This Article contributes a novel idea to the literature on capital market gatekeepers: positive incentive systems for gatekeepers to perform functions not required of them in exchange for rewards if they perform the functions successfully. Capital market gatekeeping theory relies upon the reputations that gatekeepers are assumed to command and protect backstopped by negative threats of legal liability for failure to perform legally mandated functions. The ineffectiveness of many gatekeepers during the late 1990s and early 2000s revealed practical limitations of the reputational constraint and the reforms that responded to the failures continue to emphasize the legal duties and legal ...


No Seat At The Table - How Corporate Governance And Law Keep Women Out Of The Boardroom , Douglas M. Branson Mar 2007

No Seat At The Table - How Corporate Governance And Law Keep Women Out Of The Boardroom , Douglas M. Branson

University of Pittsburgh School of Law Working Paper Series

Based upon substantial numbers of women enrolling in MBA and law programs, from the 1970s onward expectations have been high. With 25 and later 36% female MBA matriculates, and 33% and later 49-51% in law, by the 21st Century the expectation was that great numbers of women would populate the CEO suites and boardrooms in the U.S.

NO SEAT AT THE TABLE (NYU Press 2007) documents how the numbers lag badly behind the expectations, and how the reality lags further yet behind the numbers. Analyses of Fortune 500 proxy data, as the enclosed chapter demonstrates, produce scant reason to ...


A Prescription To Retire The Rhetoric Of "Principles-Based Systems" In Corporate Law, Securities Regulation And Accounting, Lawrence A. Cunningham Mar 2007

A Prescription To Retire The Rhetoric Of "Principles-Based Systems" In Corporate Law, Securities Regulation And Accounting, Lawrence A. Cunningham

Boston College Law School Faculty Papers

This Article corrects widespread misconception about whether complex regulatory systems can be fairly described as either “rules-based” or “principles-based” (also called “standards-based”). Promiscuous use of these labels has proliferated in the years since the implosion of Enron Corp. While the concepts of rules and principles (or standards) are useful to classify individual provisions, they are not scalable to the level of complex regulatory systems. The Article uses examples from corporate law, securities regulation and accounting to illustrate this problematic phenomenon before turning to a series of possible explanations for the widespread use of these misleading labels. The piece contributes to ...


Criminalization Of Corporate Law: The Impact On Shareholders And Other Constituents, Jill E. Fisch Jan 2007

Criminalization Of Corporate Law: The Impact On Shareholders And Other Constituents, Jill E. Fisch

Faculty Scholarship at Penn Law

No abstract provided.


Does Analyst Independence Sell Investors Short?, Jill E. Fisch Jan 2007

Does Analyst Independence Sell Investors Short?, Jill E. Fisch

Faculty Scholarship at Penn Law

Regulators responded to the analyst scandals of the late 1990s by imposing extensive new rules on the research industry. These rules include a requirement forcing financial firms to separate investment banking operations from research. Regulators argued, with questionable empirical support, that the reforms were necessary to eliminate analyst conflicts of interest and ensure the integrity of sell-side research.

By eliminating investment banking revenues as a source for funding research, the reforms have had substantial effects. Research coverage of small issuers has been dramatically reduced—the vast majority of small capitalization firms now have no coverage at all. The market for ...


Fiduciary Duties And The Analyst Scandals, Jill E. Fisch Jan 2007

Fiduciary Duties And The Analyst Scandals, Jill E. Fisch

Faculty Scholarship at Penn Law

No abstract provided.


Give Me Equity Or Give Me Death - The Role Of Competition And Compensation In Building Silicon Valley, Richard A. Booth Dec 2006

Give Me Equity Or Give Me Death - The Role Of Competition And Compensation In Building Silicon Valley, Richard A. Booth

Working Paper Series

In this essay, I argue that the preeminence of Silicon Valley as an incubator of technology companies is attributable to equity compensation. Ronald Gilson, relying on the work of AnnaLee Saxenian and others who have noted the tendency of Silicon Valley employees to job hop, has suggested that California law prohibiting the enforcement of non-compete agreements was a major factor in the rise of Silicon Valley (and the demise of Route 128). I extend this line of thought by suggesting that California employers may have relied on equity compensation as a substitute way to bind employees. I argue further that ...


Too Big To Fail: Moral Hazard In Auditing And The Need To Restructure The Industry Before It Unravels, Lawrence A. Cunningham Sep 2006

Too Big To Fail: Moral Hazard In Auditing And The Need To Restructure The Industry Before It Unravels, Lawrence A. Cunningham

Boston College Law School Faculty Papers

Large audit firms may believe that they are too big to fail. Arthur Andersen’s 2002 criminal indictment reduced their number from five to four, and the government decided in 2005 to avoid indicting KPMG for crimes it admitted committing. If audit firms interpret the government’s reluctance to indict as signaling aversion to tough action against them, moral hazard arises. This offsets auditing improvements mandated by the Sarbanes-Oxley Act of 2002 that are designed to strengthen auditors’ reputations with managers for thoroughness and improve financial statement reliability. Neutralizing this moral hazard requires a credible alternative industry structure so that ...


Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch Apr 2006

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

Faculty Scholarship at Penn Law

The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge ...


Regulatory Responses To Investor Irrationality: The Case Of The Research Analyst, Jill E. Fisch Jan 2006

Regulatory Responses To Investor Irrationality: The Case Of The Research Analyst, Jill E. Fisch

Faculty Scholarship at Penn Law

An extensive body of behavioral economics literature suggests that investors do not behave with perfect rationality. Instead, investors are subject to a variety of biases that may cause them to react inappropriately to information. The policy challenge posed by this observation is to identify the appropriate response to investor irrationality. In particular, should regulators attempt to protect investors from bad investment decisions that may be the result of irrational behavior?

This Article considers the appropriate regulatory response to investor irrationality within the concrete context of the research analyst. Many commentators have argued that analyst conflicts of interest led to biased ...


Supersize Pay, Incentive Compatibility, And The Volatile Shareholder Interest, William W. Bratton Jan 2006

Supersize Pay, Incentive Compatibility, And The Volatile Shareholder Interest, William W. Bratton

Faculty Scholarship at Penn Law

No abstract provided.


Private Standards In Public Law: Copyright, Lawmaking And The Case Of Accounting, Lawrence A. Cunningham Mar 2005

Private Standards In Public Law: Copyright, Lawmaking And The Case Of Accounting, Lawrence A. Cunningham

Boston College Law School Faculty Papers

Government increasingly leverages its regulatory function by embodying in law standards that are promulgated and copyrighted by non-governmental organizations. Departures from such standards expose citizens to criminal, civil and administrative sanctions, yet private actors generate, control and limit access to them. Despite governmental ambitions, no one is responsible for evaluating the legitimacy of this approach and no framework exists to facilitate analysis. This Article contributes an analytical framework and, for the federal government, nominates the Director of the Federal Register to implement it. Analysis is animated using among the oldest and broadest examples of this pervasive but stealthy phenomenon: embodiment ...


Regulation Nms: Has The Sec Exceeded Its Congressional Mandate To Facilitate A “National Market System” In Securities Trading?, Dale A. Oesterle Jan 2005

Regulation Nms: Has The Sec Exceeded Its Congressional Mandate To Facilitate A “National Market System” In Securities Trading?, Dale A. Oesterle

The Ohio State University Moritz College of Law Working Paper Series

The SEC is currently holding hearings on sweeping changes to the micro-structure of the country's securities trading markets - modifying the trade through rule, for example. Professor Oesterle argues that the SEC should not be in the business of so structuring the country's securities markets in the first place. In the piece he chronicles the SEC's expansive interpretation of its power under Congress's 1975 National Market System Amendments to the 1934 Securities and Exchange Act and questions whether Congress intended to grant the SEC such a mandate.


The Financial Statement Insurance Alternative To Auditor Liability, Lawrence A. Cunningham Jan 2005

The Financial Statement Insurance Alternative To Auditor Liability, Lawrence A. Cunningham

Boston College Law School Lectures and Presentations

These articles evaluate using financial statement insurance (FSI) to reduce the frequency and magnitude of audit failure. The FSI concept was pioneered by Josh Ronen, NYU Accounting Professor, who has modeled its economic aspects. My paper examines FSI’s efficacy from policy and legal perspectives. I conclude that while the model is not perfect, it promises considerable advantages over the current model. While some of the existing system’s imperfections are sustained or reappear in different guises, none of the existing imperfections appears to be aggravated and the rest likely are mitigated significantly. So I prescribe a framework to permit ...


Do Institutions Matter? The Impact Of The Lead Plaintiff Provision Of The Private Securities Litigation Reform Act, Stephen Choi, Jill E. Fisch, A. C. Pritchard Jan 2005

Do Institutions Matter? The Impact Of The Lead Plaintiff Provision Of The Private Securities Litigation Reform Act, Stephen Choi, Jill E. Fisch, A. C. Pritchard

Faculty Scholarship at Penn Law

When Congress enacted the Private Securities Litigation Reform Act in 1995 (“PSLRA”), the Act’s “lead plaintiff” provision was the centerpiece of its efforts to increase investor control over securities fraud class actions. The lead plaintiff provision alters the balance of power between investors and class counsel by creating a presumption that the investor with the largest financial stake in the case will serve as lead plaintiff. The lead plaintiff then chooses class counsel and, at least in theory, negotiates the terms of counsel’s compensation.

Congress’s stated purpose in enacting the lead plaintiff provision was to encourage institutional ...


The New Dividend Puzzle, William W. Bratton Jan 2005

The New Dividend Puzzle, William W. Bratton

Faculty Scholarship at Penn Law

No abstract provided.