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Full-Text Articles in Law

Economic Development, Legality, And The Transplant Effect, Katharina Pistor, Daniel Berkowitz, Jean-Francois Richard Jan 1999

Economic Development, Legality, And The Transplant Effect, Katharina Pistor, Daniel Berkowitz, Jean-Francois Richard

Faculty Scholarship

This paper analyzes the determinants of effective legal institutions (legality) and their impact on economic development today using data from 49 countries. We show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family (i.e. English, French, German, or Scandinavian). Countries that have developed legal orders internally, adapted the transplanted law to local conditions, and/or had a population that was already familiar with basic legal principles of the transplanted law have more effective legality than "transplant effect" countries that received foreign law without ...


Taking The "I" Out Of "Team": Intra-Firm Monitoring And The Content Of Fiduciary Duties, Eric L. Talley Jan 1999

Taking The "I" Out Of "Team": Intra-Firm Monitoring And The Content Of Fiduciary Duties, Eric L. Talley

Faculty Scholarship

This article employs a "team-production" account of the firm to investigate the relationship between organizational structure and fiduciary duties. Although the fiduciaries or "closely-held" firms (such as partnerships and close corporations) have historically been held to stricter standards of comportment than have their counterparts in widely-held firms (such as public corporations), a team-production analysis raises some troubling questions about this traditional distinction. In particular, I shall argue that within closely-held firms, enhanced fiduciary duties can create inefficient monitoring incentives among team members – a problem that is largely avoided within widely-held organizational structures. Moreover, these strategic costs imply that weaker rather ...


A Theory Of Legal Presumptions, Antonio E. Bernardo, Eric L. Talley, Ivo Welch Jan 1999

A Theory Of Legal Presumptions, Antonio E. Bernardo, Eric L. Talley, Ivo Welch

Faculty Scholarship

This paper develops a theoretical account of presumptions, focusing on their capacity to mediate between costly litigation and ex ante incentives. We augment a standard moral hazard model with a redistributional litigation game in which a legal presumption parameterizes how a court "weighs" evidence offered by the opposing sides. Strong pro-defendant presumptions can foreclose lawsuits altogether, but also lead to shirking. Strong pro-plaintiff presumptions have the opposite effects. Moderate presumptions give rise to equilibria in which productive effort and suit occur probabilistically. The socially-optimal presumption trades off litigation costs against agency costs, and could be either strong or moderate, depending ...


The Boundaries Of Private Property, Michael Heller Jan 1999

The Boundaries Of Private Property, Michael Heller

Faculty Scholarship

The American law of property encourages people to create wealth by breaking up and recombining resources in novel ways. But fragmenting resources proves easier than putting them back together again. Property law responds by limiting the one-way ratchet of fragmentation. Hidden within the law is a boundary principle that keeps resources well-scaled for productive use. Recently, however, the Supreme Court has been labeling more and more fragments as private property, an approach that paradoxically undermines the usefulness of private property as an economic institution and Constitutional category. Identifying the boundary principle threads together disparate property law doctrines, clarifies strange asymmetries ...


Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr. Jan 1999

Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr.

Faculty Scholarship

This paper analyzes the comparative experiences of Poland and the Czech Republic with voucher privatization. Because of a number of similarities between these two transitional economies, it finds their comparative experience to provide a useful natural experiment, with the critical distinguishing variable being their different approaches to regulatory controls. However, while their experiences have been very different, their substantive corporate law was very similar. The true locus of regulatory differences appears then to have been the area of securities market regulation, where their approaches differed dramatically.

Re-examining the work of LaPorta, Lopez-de-Silanos, Shleifer & Vishny, this paper submits that (1) the homogenity of both common law systems and civil law systems has been overstated; (2) common law systems in particular differ ...


Does Venture Capital Require An Active Stock Market?, Ronald J. Gilson, Bernard S. Black Jan 1999

Does Venture Capital Require An Active Stock Market?, Ronald J. Gilson, Bernard S. Black

Faculty Scholarship

The United States has both an active venture capital industry and well-developed stock markets. Japan and Germany have neither. We argue here that this is no accident – that venture capital can flourish especially – and perhaps only – if the venture capitalist can exit from a successful portfolio company through an initial public offering (IPO), which requires an active stock market. Understanding the link between the stock market and the venture capital market requires understanding the contractual arrangements between entrepreneurs and venture capital providers especially the importance of exit by venture capitalists and the opportunity, present only if IPO exit is possible ...


Deterrence And Distribution In The Law Of Takings, Michael A. Heller, James E. Krier Jan 1999

Deterrence And Distribution In The Law Of Takings, Michael A. Heller, James E. Krier

Faculty Scholarship

Supreme Court decisions over the last three-quarters of a century have turned the words of the Takings Clause into a secret code that only a momentary majority of the Court is able to understand. The Justices faithfully moor their opinions to the particular terms of the Fifth Amendment, but only by stretching the text beyond recognition. A better approach is to consider the purposes of the Takings Clause, efficiency and justice, and go anew from there. Such a method reveals that in some cases there are good reasons to require payment by the government when it regulates property, but not ...


Making Something Out Of Nothing: The Law Of Takings And Phillips V. Washington Legal Foundation, Michael A. Heller, James E. Krier Jan 1999

Making Something Out Of Nothing: The Law Of Takings And Phillips V. Washington Legal Foundation, Michael A. Heller, James E. Krier

Faculty Scholarship

Phillips v. Washington Legal Foundation held that interest on principal amounts deposited into IOLTA accounts is the property of the various clients who handed over the money but expressed no view as to whether the Texas IOLTA program worked a taking, or, if it did, whether any compensation was due. The debates among the justices about the meaning of private property, argued in terms of contextual and conceptual severance, are unlikely to prove fruitful. We elaborate a better approach in terms of the underlying purposes of just compensation. We conclude that efficiency and justice are best served by uncoupling matters ...


Optimal Timing And Legal Decisionmaking: The Case Of The Liquidation Decision In Bankruptcy, Douglas G. Baird, Edward R. Morrison Jan 1999

Optimal Timing And Legal Decisionmaking: The Case Of The Liquidation Decision In Bankruptcy, Douglas G. Baird, Edward R. Morrison

Faculty Scholarship

Until the firm is sold or a plan of reorganization is confirmed, Chapter 11 entrusts a judge with the decision of whether to keep a firm as a going concern or to shut it down. The judge revisits this liquidation decision multiple times. The key is to make the correct decision at the optimal time. This paper models this decision as the exercise of a real option and shows that it depends critically on particular types of information about the firm and its industry. Liquidations take place too soon if we merely compare the liquidation value of the assets with ...


Executives And Hedging: The Fragile Legal Foundation Of Incentive Compatibility, David M. Schizer Jan 1999

Executives And Hedging: The Fragile Legal Foundation Of Incentive Compatibility, David M. Schizer

Faculty Scholarship

In the capital markets, the 1990s have been the decade of executive stock options and the derivatives market. Legal scholars and economists have begun to realize that, in combination, these two trends raise a serious concern. Options are supposed to inspire better performance by tying pay to the stock price. Yet, what if an executive could use the derivatives market to simulate a sale of her option – a practice known as "hedging" – without violating her contract with the firm? The incentive justification for option grants would no longer hold.

This Article demonstrates that the tax law helps avert this consequence ...


Reforming Social Security: A Practical And Workable System Of Personal Retirement Accounts, Fred T. Goldberg, Michael J. Graetz Jan 1999

Reforming Social Security: A Practical And Workable System Of Personal Retirement Accounts, Fred T. Goldberg, Michael J. Graetz

Faculty Scholarship

This paper details a method for implementing personal retirement accounts (PRAs) as a part of Social Security reform. The approach described here answers the following questions: how funds are collected and credited to each participants' retirement account; how money is invested; and how funds are distributed to retirees. It is designed to accommodate a variety of answers to a wide range of important policy questions; to minimize administrative costs and distribute those costs in a fair and reasonable way; to minimize the burden on employers, especially small employees who do not now maintain a qualified retirement plan; and to meet ...


Application-Centered Internet Analysis, Tim Wu Jan 1999

Application-Centered Internet Analysis, Tim Wu

Faculty Scholarship

There is a now-standard debate about law and the Internet. One side asserts that the Internet is so new and different that it calls for new legal approaches, even its own sovereign law. The other side argues that, although it is a new technology, the Internet nonetheless presents familiar legal problems. It is a battle of analogies: One side refers to Cyberspace as a place, while the other essentially equates the Internet and the telephone.

In my view, these two positions are both wrong and right: wrong in their characterization of the Internet as a whole, yet potentially right about ...


Drug Treatment Courts And Emergent Experimentalist Government, Michael C. Dorf, Charles F. Sabel Jan 1999

Drug Treatment Courts And Emergent Experimentalist Government, Michael C. Dorf, Charles F. Sabel

Faculty Scholarship

Despite the continuing "war on drugs," the last decade has witnessed the creation and nationwide spread of a remarkable set of institutions, drug treatment courts. In drug treatment court, a criminal defendant pleads guilty or otherwise accepts responsibility for a charged offense and accepts placement in a court-mandated program of drug treatment. The judge and court personnel closely monitor the defendant's performance in the program and the program's capacity to serve the mandated client. The federal government and national associations in turn monitor the local drug treatment courts and disseminate successful practices. The ensemble of institutions, monitoring, and ...


Revaluing Restitution: From The Talmud To Postsocialism, Michael A. Heller, Christopher Serkin Jan 1999

Revaluing Restitution: From The Talmud To Postsocialism, Michael A. Heller, Christopher Serkin

Faculty Scholarship

Whatever happened to the study of restitution? Once a core private law subject along with property, torts, and contracts, restitution has receded from American legal scholarship. Few law professors teach the material, fewer still write in the area, and no one even agrees what the field comprises anymore. Hanoch threatens to reverse the tide and make restitution interesting again. The book takes commonplace words such as "value" and "gain" and shows how they embody a society's underlying normative principles. Variations across cultures in the law of unjust enrichment reflect differences in national understandings of sharing, property, and even personhood ...


A Government For Our Time? Business Improvement Districts And Urban Governance, Richard Briffault Jan 1999

A Government For Our Time? Business Improvement Districts And Urban Governance, Richard Briffault

Faculty Scholarship

The emergence and rapid spread of business improvement districts ("BIDs") is one of the most important recent developments in American cities. BIDs have been controversial, with both supporters and proponents viewing the districts as part of a trend toward the privatization of the public sector. By examining the legal and political structures that determine BID formation, functions, finances and governance, this Article determines that BIDs are not private entities but are, instead, a distinctive hybrid of public and private elements. Moreover, although the particular fusion of public and private institutions, values and concerns embodied in the BID is unique, Professor ...


Lifetime Employment: Labor Peace And The Evolution Of Japanese Corporate Governance, Ronald J. Gilson, Mark J. Roe Jan 1999

Lifetime Employment: Labor Peace And The Evolution Of Japanese Corporate Governance, Ronald J. Gilson, Mark J. Roe

Faculty Scholarship

In Japan, large firms' relationships with their employees differ from those prevailing in large American firms. Large Japanese firms guarantee many employees lifetime employment, and the firms' boards consist of insider employees. Neither relationship is common in the United States.

Japanese lifetime employment is said to encourage firms and employees to invest in human capital. We examine the reported benefits of the firm's promise of lifetime employment, but conclude that it is no more than peripheral to human capital investments. Rather, the "dark" side of Japanese labor practice – constricting the external labor market – likely yielded the human capital benefits ...


The Boundaries Of Private Property, Michael A. Heller Jan 1999

The Boundaries Of Private Property, Michael A. Heller

Faculty Scholarship

If your house and fields are worth more separately, divide them; if you want to leave a ring to your child now and grandchild later, split the ownership in a trust. The American law of property encourages owners to subdivide resources freely. Hidden within the law, however, is a boundary principle that limits the right to subdivide private property into wasteful fragments. While people often create wealth when they break up and recombine property in novel ways, owners may make mistakes, or their self-interest may clash with social welfare. Property law responds with diverse doctrines that prevent and abolish excessive ...


Crime And Work, Jeffrey Fagan, Richard B. Freeman Jan 1999

Crime And Work, Jeffrey Fagan, Richard B. Freeman

Faculty Scholarship

Crime and legal work are not mutually exclusive choices but represent a continuum of legal and illegal income-generating activities. The links between crime and legal work involve trade-offs among crime returns, punishment costs, legal work opportunity costs, and tastes and preferences regarding both types of work. Rising crime rates in the 1980s in the face of rising incarceration rates suggest that the threat of punishment is not the dominant cost of crime. Crime rates are inversely related to expected legal wages, particularly among young males with limited job skills or prospects. Recent ethnographic research shows that involvement in illegal work ...


Beyond The Independent Counsel: Evaluating The Options, Thomas W. Merrill Jan 1999

Beyond The Independent Counsel: Evaluating The Options, Thomas W. Merrill

Faculty Scholarship

The Independent Counsel Act expires on June 30, 1999. Should it be extended? Extended with modifications? Radically reformed? Or should it be allowed to sunset with nothing put in its place? To answer these questions, we need to address some more fundamental questions: (1) Do we truly need an independent office to investigate alleged wrongdoing by high-ranking officers of the executive branch? (2) If so, what are the options for the organizational structure of such an office? (3) By what criteria should the different institutional options be evaluated? (4) Under these criteria, which option represents the best, or perhaps more ...


Localism And Regionalism, Richard Briffault Jan 1999

Localism And Regionalism, Richard Briffault

Faculty Scholarship

Localism and regionalism are normally seen as conflicting, conceptions of metropolitan area governance. Localism is the belief that the existing system of a large number of relatively small governments wielding power over such critical matters as land use regulation, local taxation, and the financing of local public services ought to be preserved. Regionalism would move some power to institutions, organizations or procedures with a larger territorial scope and more population than existing local governments. Regionalism appears to be a step towards centralization, and the antithesis of the decentralization represented by localism. Yet, in the metropolitan areas that dominate America at ...


A Theory Of Legal Presumptions, Antonio E. Bernardo, Eric L. Talley, Ivo Welch Jan 1999

A Theory Of Legal Presumptions, Antonio E. Bernardo, Eric L. Talley, Ivo Welch

Faculty Scholarship

This article analyzes how legal presumptions can mediate between costly litigation and ex ante incentives. We augment a moral hazard model with a redistributional litigation game in which a presumption parameterizes how a court 'weighs' evidence offered by the opposing sides. Strong prodefendant presumptions foreclose lawsuits altogether, but also engender shirking. Strong proplaintiff presumptions have the opposite effects. Moderate presumptions give rise to equilibria in which both shirking and suit occur probabilisitically. The socially optimal presumption trades off agency costs against litigation costs, and could be either strong or moderate, depending on the social importance of effort, the costs of ...


Lessons From Fiascos In Russian Corporate Governance, Merritt B. Fox, Michael Heller Jan 1999

Lessons From Fiascos In Russian Corporate Governance, Merritt B. Fox, Michael Heller

Faculty Scholarship

Bad corporate governance is often invoked to explain poor enterprise performance, but the catch phrase is never precisely defined. Neither its consequences for the real economy, nor its causes in particular countries has been adequately explained. This paper uses Russian enterprise examples to address these open questions in corporate governance theory. We define corporate governance by looking to the economic functions of the firm rather than to any particular set of national corporate laws. Firms exhibit good corporate governance when their managers maximize residuals and, in the case of investor-owned firms, make pro rata distributions to shareholders.

Using this definition ...


The Limits Of Discipline: Ownership And Hard Budget Constraints In The Transition Economies, Roman Frydman, Cheryl W. Gray, Marek P. Hessel, Andrzej Rapaczynski Jan 1999

The Limits Of Discipline: Ownership And Hard Budget Constraints In The Transition Economies, Roman Frydman, Cheryl W. Gray, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

This paper, based on a large sample of mid-sized manufacturing firms in the Czech Republic, Hungary and Poland, argues that the imposition of financial discipline is not sufficient to remedy ownership and governance-related deficiencies of corporate performance. The study offers three main conclusions. First, we find that state enterprises represent a higher credit risk both because of their inferior economic performance and because of their lesser willingness or propensity to meet their payment obligations. Second, the brunt of the state firms' lower creditworthiness is borne by their state creditors, as state enterprises deflect the higher risk away from private creditors ...


Revaluing Restitution: From The Talmud To Postsocialism (Reviewing Hanoch Dagan's Unjust Enrichment), Michael Heller, Christopher Serkin Jan 1999

Revaluing Restitution: From The Talmud To Postsocialism (Reviewing Hanoch Dagan's Unjust Enrichment), Michael Heller, Christopher Serkin

Faculty Scholarship

Whatever happened to the study of restitution? Once a core private law subject along with property, torts and contracts, restitution has receded from American legal scholarship. Hanoch Dagan's book "Unjust Enrichment: A Study of Private Law and Public Values" threatens to reverse the tide and make restitution interesting again. The book shows how we can examine commonplace words such as "value" and "gain" to extract the core social values embedded in the private law. The technicalities of unjust enrichment reveal compelling stories about property, personhood, and national ethos. In our review, we put Dagan's jurisprudential approach to the ...


Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr. Jan 1999

Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr.

Faculty Scholarship

This paper analyzes the comparative experiences of Poland and the Czech Republic with voucher privatization. Because of a number of similarities between these two transitional economies, it finds their comparative experience to provide a useful natural experiment, with the critical distinguishing variable being their different approaches to regulatory controls. However, while their experiences have been very different, their substantive corporate law was very similar. The true locus of regulatory differences appears then to have been the area of securities market regulation, where their approaches differed dramatically.

Re-examining the work of LaPorta, Lopez-de-Silanos, Shleifer & Vishny, this paper submits that (1) the homogenity of both common law systems and civil law systems has been overstated; (2) common law systems in particular differ ...


The Constitution And The Cathedral: Prohibiting, Purchasing, And Possibly Condemning Tobacco Advertising, Thomas W. Merrill Jan 1999

The Constitution And The Cathedral: Prohibiting, Purchasing, And Possibly Condemning Tobacco Advertising, Thomas W. Merrill

Faculty Scholarship

This Article has both theoretical and practical objectives, which are closely interrelated. The theoretical objective is to develop a framework for understanding the "transaction structure" of constitutional rights. By this, I refer to the different rules that determine when the government may purchase, condemn, or otherwise extinguish constitutional rights. The practical objective is to consider different options that may be available to the government, as part of a broader effort to reduce the incidence of smoking, to curtail tobacco advertising that would otherwise be protected under the First Amendment. It is my hope that the theoretical framework will illuminate the ...


Secured Credit And Software Financing, Ronald J. Mann Jan 1999

Secured Credit And Software Financing, Ronald J. Mann

Faculty Scholarship

Software is a relatively new type of business asset, but already has taken on a central role in all sectors of the economy; when any asset brings such a crucial value to businesses, the desire for lending based on that asset cannot be far behind. Unfortunately, the existing academic literature contains no sustained examination of software-related lending.

Because the software industry is in its infancy, the existing empirical evidence is inadequate to support any understanding of it. Accordingly, I undertook a series of twenty-nine informal interviews with industry participants, including lenders in both the Massachusetts Route 128 corridor and Silicon ...


Verification Institutions In Financing Transactions, Ronald J. Mann Jan 1999

Verification Institutions In Financing Transactions, Ronald J. Mann

Faculty Scholarship

One of the most common problems in commercial transactions is the resolution of information asymmetries, situations in which one party to the transaction knows more about a relevant fact than the other party. The natural response of the disadvantaged party is to attempt to investigate the transaction for itself – to investigate the matter with "due diligence" – but often such an investigation will be expensive and, however diligently undertaken, leave the truth of the matter uncertain. A law-centered approach to the problem would call for the development of warranties and covenants that the party with superior information would give to the ...


The Cutting Edge Of Poster Law, Michael A. Heller Jan 1999

The Cutting Edge Of Poster Law, Michael A. Heller

Faculty Scholarship

Students place tens of thousands of posters around law schools each year – in staircases, on walls, and on bulletin boards. Rarely, however, do formal disputes about postering arise. Students know how far to go – and go no farther despite numerous avenues for postering deviance: blizzarding, megasigns, commercial or scurrilous signs. What is the history of poster law? What are its norms and rules, privileges and procedures? Is poster law effident? Is it just?


The Supreme Court, Sexual Citizenship And The Idea Of Progress, Kendall Thomas Jan 1999

The Supreme Court, Sexual Citizenship And The Idea Of Progress, Kendall Thomas

Faculty Scholarship

Is American Progressive Constitutionalism dead ... yet? I propose to seek the beginnings of an answer to this question in the pages of a recent decision by the United States Supreme Court. I do feel obliged to say this, not because I am committed to a court-centered adjudicative conception of American constitutionalism; to the contrary. But rather, because the decision on which I want to focus seems to me to offer a rich resource for critical reflection on the idea of self-government whose connections to Progressive Constitutionalism give us our topic this afternoon.