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Full-Text Articles in Law
Do Legal Origins Predict Legal Substance?, Anu Bradford, Yun-Chien Chang, Adam S. Chilton, Nuno Garoupa
Do Legal Origins Predict Legal Substance?, Anu Bradford, Yun-Chien Chang, Adam S. Chilton, Nuno Garoupa
Faculty Scholarship
There is a large body of research in economics and law suggesting that the legal origin of a country – that is, whether its legal regime is based on English common law or French, German, or Nordic civil law – profoundly impacts a range of outcomes. However, the exact relationship between legal origin and legal substance has been disputed in the literature and not fully explored with nuanced legal coding. We revisit this debate while leveraging novel cross-country data sets that provide detailed coding of two areas of laws: property and antitrust. We find that having shared legal origins strongly …
Race And Bankruptcy: Explaining Racial Disparities In Consumer Bankruptcy, Edward R. Morrison, Belisa Pang, Antoine Uettwiller
Race And Bankruptcy: Explaining Racial Disparities In Consumer Bankruptcy, Edward R. Morrison, Belisa Pang, Antoine Uettwiller
Faculty Scholarship
African American bankruptcy filers select Chapter 13 far more often than other debtors, who opt instead for Chapter 7, which has higher success rates and lower attorneys’ fees. Prior scholarship blames racial discrimination by attorneys. We propose an alternative explanation: Chapter 13 offers benefits, including retention of cars and driver’s licenses, that are more valuable to African American debtors because of relatively long commutes. We study a 2011 policy change in Chicago, which seized cars and suspended licenses of consumers with large traffic-related debts. The policy produced a large increase in Chapter 13 filings, especially by African Americans. Two mechanisms …
I Promise To Pay, Joshua Mitts
I Promise To Pay, Joshua Mitts
Faculty Scholarship
Consumers are more likely to keep a repayment promise they make themselves. When a scheduling conflict prevents a borrower from attending a mortgage closing, a power of attorney (POA) empowers a third party to promise that the borrower will repay the loan. On a matched sample of POA and non-POA loans, and comparing within borrower and within property, I link POAs to greater delinquency and foreclosure. Although POAs are uncorrelated with cash flow shocks, they reflect reduced promise keeping when borrowers undergo financial distress. This association vanishes for originator-servicers’ loans, which suggests that financial intermediation plays a role in consumer …
Trade Openness And Antitrust Law, Anu Bradford, Adam S. Chilton
Trade Openness And Antitrust Law, Anu Bradford, Adam S. Chilton
Faculty Scholarship
Openness to international trade and adoption of antitrust laws can both curb anti-competitive behavior. But scholars have long debated the relationship between the two. Some argue that greater trade openness makes antitrust unnecessary, while others contend that antitrust laws are still needed to realize the benefits of trade liberalization. Data limitations have made this debate largely theoretical to date. We study the relationship between trade and antitrust empirically using new data on antitrust laws and enforcement activities. We find that trade openness and stringency of antitrust laws are positively correlated from 1950 to 2010 overall, but the positive correlation disappears …
Designing Corporate Bailouts, Antonio E. Bernardo, Eric L. Talley, Ivo Welch
Designing Corporate Bailouts, Antonio E. Bernardo, Eric L. Talley, Ivo Welch
Faculty Scholarship
Although common economic wisdom suggests that government bailouts are inefficient because they reduce incentives to avoid failure and induce excessive entry by marginal firms, in practice bailouts are difficult to avoid for systemically significant enterprises. Recent experience suggests that bailouts also induce litigation from shareholders and managers complaining about expropriation and wrongful termination by the government. Our model shows how governments can design tax-financed corporate bailouts to reduce these distortions and points to the causes of inefficiencies in real-world implementations such as the Troubled Asset Relief Program. Bailouts with minimal distortion depend critically on the government’s ability to expropriate shareholders …
State Contract Law And Debt Contracts, Colleen Honigsberg, Sharon Katz, Gil Sadka
State Contract Law And Debt Contracts, Colleen Honigsberg, Sharon Katz, Gil Sadka
Ira M. Millstein Center for Global Markets and Corporate Ownership
This paper examines the relationship between debt contracts and state contract law. We first develop an index to evaluate whether each state’s law is favorable or unfavorable to lenders. We then analyze how the contract terms, the frequency of covenant violations, and the repercussions of covenant violations vary across states. We find that cash collateral is most likely to be used when the contract is governed by law that is favorable to debtors and that out-of-state borrowers who use favorable law pay higher yield spreads. In addition, when the law is favorable to lenders, there are significantly fewer covenant violations, …
Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith
Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith
Faculty Scholarship
In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional …
Bankruptcy Decision Making: An Empirical Study Of Continuation, Edward R. Morrison
Bankruptcy Decision Making: An Empirical Study Of Continuation, Edward R. Morrison
Faculty Scholarship
Many small businesses attempt to reorganize under Chapter 11 of the U.S. Bankruptcy Code, but most are ultimately liquidated instead. Little is known about this shutdown decision. It is widely suspected that the bankruptcy process exhibits a continuation bias, allowing failing businesses to linger under the protection of the court, which resists liquidation even when it is optimal. This paper examines the shutdown decision in a sample of Chapter 11 bankruptcy cases filed in a typical bankruptcy court over the course of a year. The presence of continuation bias is tested along several dimensions – the extent of managerial control …
The Effectiveness Of Juvenile Correctional Facilities: Public Versus Private Management, Patrick J. Bayer, David Pozen
The Effectiveness Of Juvenile Correctional Facilities: Public Versus Private Management, Patrick J. Bayer, David Pozen
Faculty Scholarship
This paper uses data on juvenile offenders released from correctional facilities in Florida to explore the effects of facility management type (private for-profit, private nonprofit, public state-operated, and public county-operated) on recidivism outcomes and costs. The data provide detailed information on individual characteristics, criminal and correctional histories, judge-assigned restrictiveness levels, and home zip codes — allowing us to control for the nonrandom assignment of individuals to facilities far better than any previous study. Relative to all other management types, for-profit management leads to a statistically significant increase in recidivism, but relative to nonprofit and state-operated facilities, for-profit facilities operate at …
Quantity And Price Adjustment In Long-Term Contracts: A Case Study Of Petroleum Coke, Victor P. Goldberg, John R. Erickson
Quantity And Price Adjustment In Long-Term Contracts: A Case Study Of Petroleum Coke, Victor P. Goldberg, John R. Erickson
Faculty Scholarship
Much economic activity takes place within a framework of complex, long-term contracts. While economists have shown increased interest in these contracts, surprisingly little is known about them, or, indeed, about how to analyze the contracting activity of private economic actors. A case study of the actual contracts used in one industry could provide sorely needed data about the way in which reasonably clever businessmen and lawyers cope with problems scholars might consider intractable. In this article, we provide such an analysis of contracts concerning a particular product – petroleum coke. We focus on the problems of quantity and price adjustment. …
Institutional Change And The Quasi-Invisible Hand, Victor P. Goldberg
Institutional Change And The Quasi-Invisible Hand, Victor P. Goldberg
Faculty Scholarship
The fundamental principle of economics is that people will pursue their own self-interest within a given institutional framework. The economist's basic policy premise is that (so long as certain "market failures" do not arise) this self-interest will, like an Invisible Hand, guide resources to their proper usage; when market failures arise the usual policy prescription is to amend the rules (for example, by breaking up monopolies, placing an "optimal" tax on pollution, or redefining property rights) to make the marginal private costs and benefits equal to the marginal social costs and benefits so that the free play on self-interest will …
Marginal Cost Pricing, Investment Theory And Catv, Victor P. Goldberg
Marginal Cost Pricing, Investment Theory And Catv, Victor P. Goldberg
Faculty Scholarship
In his article, Marginal Cost Pricing, Investment Theory and CATV, James Ohls makes a number of erroneous assertions concerning the optimum pricing of CATV. Most of his problems stem from a failure to properly define the environment in which the optimum price is to be set and the role that an optimum price should play. If one alters Ohls' implicit (and sometimes contradictory) assumptions and if one keeps in mind the purpose prices should serve in an economic system, a number of Ohls' conclusions are altered.