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Articles 1 - 17 of 17
Full-Text Articles in Law
The Duty To Manage Risk, A. Christine Hurt
Fiduciary Discretion, D. Gordon Smith, Jordan C. Lee
Fiduciary Discretion, D. Gordon Smith, Jordan C. Lee
Faculty Scholarship
Discretion is an important feature of all contractual relationships. In this Article, we rely on incomplete contract theory to motivate our study of discretion, with particular attention to fiduciary relationships. We make two contributions to the substantial literature on fiduciary law. First, we describe the role of fiduciary law as “boundary enforcement,” and we urge courts to honor the appropriate exercise of discretion by fiduciaries, even when the beneficiary or the judge might perceive a preferable action after the fact. Second, we answer the question, how should a court define the boundaries of fiduciary discretion? We observe that courts often …
Incentivizing Credit Rating Agencies Under The Issuer Pay Model Through A Mandatory Compensation Competition, Robert J. Rhee
Incentivizing Credit Rating Agencies Under The Issuer Pay Model Through A Mandatory Compensation Competition, Robert J. Rhee
Faculty Scholarship
Credit rating agencies are important institutions of the global capital markets. If they had performed properly, the financial crisis of 2008-2009 would not have occurred. This article offers the simplest fix proposed thus far, and it is contrarian. This Article accepts the central role of rating agencies in the regulation of bond investments, the realities of a duopoly, and the issuer-pay model of compensation. The status quo is the baseline. The role of regulation should be to create the conditions necessary to induce competition. This article proposes that a small, recurring portion of revenue earned by the largest rating agencies …
Putting The Securities Laws To The Test: The Long-Standing Approach To Federal Securities Regulation Is Not Working, Elisabeth De Fontenay
Putting The Securities Laws To The Test: The Long-Standing Approach To Federal Securities Regulation Is Not Working, Elisabeth De Fontenay
Faculty Scholarship
No abstract provided.
The Monitor-Client Relationship, Veronica Root
The Monitor-Client Relationship, Veronica Root
Faculty Scholarship
After the government discovers wrongdoing by a corporation, the corporation and the government often enter into an agreement stating that the corporation will retain a “monitor.” A corporate compliance monitor, unlike the gatekeeper, is not charged with “monitoring” the corporation in an attempt to detect and prevent wrongdoing. A monitor, unlike the probation officer, is not solely charged with ensuring that the corporation complies with a previously determined set of requirements. Instead, a corporate compliance monitor is responsible for (i) investigating the extent of the wrongdoing already detected and reported to the government, (ii) discovering the cause of the corporation’s …
The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon
The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon
Faculty Scholarship
U.S. bankruptcy law grants special rights and immunities to creditors in derivatives transactions, including virtually unlimited enforcement rights. This article argues that these rights and immunities result from a form of path dependence, a sequence of industry-lobbied legislative steps, each incremental and in turn serving as apparent justification for the next step, without a rigorous and systematic vetting of the consequences. Because the resulting “safe harbor” has not been fully vetted, its significance and utility should not be taken for granted; and thus regulators, legislators, and other policymakers—whether in the United States or abroad—should not automatically assume, based on its …
Regulating Systemic Risk In Insurance, Daniel Schwarcz, Steven L. Schwarcz
Regulating Systemic Risk In Insurance, Daniel Schwarcz, Steven L. Schwarcz
Faculty Scholarship
As exemplified by the dramatic failure of AIG, insurance companies and their affiliates played a central role in the 2008 global financial crisis. It is therefore not surprising that the Dodd-Frank Act—the United States’ primary legislative re-sponse to the crisis—contained an entire title dedicated to insurance regulation, which has traditionally been the responsibility of individual states. The most important insurance-focused reforms in Dodd-Frank empower the Federal Reserve Bank to impose an additional layer of regulatory scrutiny on top of state insurance regulation for a small number of “systemically important” nonbank financial companies, such as AIG. This Article argues, however, that …
Extraterritorial Impacts Of Recent Financial Regulation Reforms: A Complex World Of Global Finance, Lawrence G. Baxter
Extraterritorial Impacts Of Recent Financial Regulation Reforms: A Complex World Of Global Finance, Lawrence G. Baxter
Faculty Scholarship
No abstract provided.
Deal Deconstructions, Case Studies, And Case Simulations: Toward Practice Readiness With New Pedagogies In Teaching Business And Transactional Law, Michelle M. Harner, Robert J. Rhee
Deal Deconstructions, Case Studies, And Case Simulations: Toward Practice Readiness With New Pedagogies In Teaching Business And Transactional Law, Michelle M. Harner, Robert J. Rhee
Faculty Scholarship
In this short commentary, we explore the use of two interrelated pedagogical methods for teaching transactional and business law. The first method is deal deconstruction, which analyzes the set of final deal documents and outcomes. This method is backward-looking, conducting a post-mortem on business transactions and analyzing the parties’ choices memorialized in the agreement against the legal and financial alternatives. The second method involves case studies and simulations, which are commonly seen in business schools. This method is forward-looking, exposing students to the uncertainties and situational contexts of doing deals and deal-related litigation. Together, these complementary methods help students understand …
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.
Private Equity Firms As Gatekeepers, Elisabeth De Fontenay
Private Equity Firms As Gatekeepers, Elisabeth De Fontenay
Faculty Scholarship
Notwithstanding the considerable attention private equity receives, there continues to be substantial confusion about what private equity does and whether this creates value. Calls for more aggressive regulation of the industry reflect a skeptical view of private equity as—at best—a zero-sum game, in which profits are generated only at the expense of other constituencies. The standard defense of private equity points to its corporate governance advantages as a source of value. This Article identifies an overlooked and increasingly important way in which private equity creates value: private equity firms act as gatekeepers in the debt markets. As repeat players, private …
A Difficult Conversation: Corporate Directors On Race And Gender, Kimberly D. Krawiec, John M. Conley, Lissa L. Broome
A Difficult Conversation: Corporate Directors On Race And Gender, Kimberly D. Krawiec, John M. Conley, Lissa L. Broome
Faculty Scholarship
This symposium essay summarizes our ongoing ethnographic research on corporate board diversity, discussing the central tension in our respondents’ views – their overwhelmingly enthusiastic support of board diversity coupled with an inability to articulate coherent accounts of board diversity benefits that might rationalize that enthusiasm. As their reactions make clear, frank dialogue about race and gender – even a seemingly benign discussion of diversity’s benefits – can be a difficult conversation.
Do The Securities Laws Matter? The Rise Of The Leveraged Loan Market, Elisabeth De Fontenay
Do The Securities Laws Matter? The Rise Of The Leveraged Loan Market, Elisabeth De Fontenay
Faculty Scholarship
One of the enduring principles of federal securities regulation is the mantra that bonds are securities, while commercial loans are not. Yet the corporate bond and loan markets in the U.S. are rapidly converging, putting significant pressure on the disparity in their regulatory treatment. As securities, corporate bonds are subject to onerous public disclosure obligations and liability regimes, which corporate loans avoid entirely. This longstanding regulatory distinction between loans and bonds is based on the traditional conception of a commercial loan as a long-term relationship between the borrowing company and a single bank, in contrast to bonds, which may be …
Comments On The September 29, 2014 Fsb Consultative Document, ‘Cross-Border Recognition Of Resolution Action’, Steven L. Schwarcz, Mark Jewett, Bruce Leonard, Catherine Walsh, David Kempthorne
Comments On The September 29, 2014 Fsb Consultative Document, ‘Cross-Border Recognition Of Resolution Action’, Steven L. Schwarcz, Mark Jewett, Bruce Leonard, Catherine Walsh, David Kempthorne
Faculty Scholarship
This CIGI Paper No. 51 was released on December 3, 2014 by the Centre for International Governance Innovation (CIGI) as a response to the Financial Stability Board’s (FSB) Consultative Document, “Cross-Border Recognition of Resolution Action.” Principally authored by CIGI Senior Fellow Steven L. Schwarcz (who works with the think tank’s International Law Research Program), the Paper comments on the policy measures proposed by the FSB, an international body that monitors and makes recommendations about the global financial system, to address the cross-border legal uncertainties of troubled systemically important financial firms. In that context, the Paper explains why a statutory approach …
Cheating On Their Taxes: When Are Tax Limitations Effective At Limiting State Taxes, Expenditures, And Budgets?, Colin H. Mccubbins, Mathew D. Mccubbins
Cheating On Their Taxes: When Are Tax Limitations Effective At Limiting State Taxes, Expenditures, And Budgets?, Colin H. Mccubbins, Mathew D. Mccubbins
Faculty Scholarship
No abstract provided.
Mitt Romney, The 47% Percent, And The Future Of The Mass Income Tax, Lawrence A. Zelenak
Mitt Romney, The 47% Percent, And The Future Of The Mass Income Tax, Lawrence A. Zelenak
Faculty Scholarship
No abstract provided.
Transnational Regulatory Regimes In Finance: A Comparative Analysis Of Their (Dis-)Integrative Effects, Katharina Pistor
Transnational Regulatory Regimes In Finance: A Comparative Analysis Of Their (Dis-)Integrative Effects, Katharina Pistor
Faculty Scholarship
Financial markets have become increasingly interconnected with financial intermediaries and instruments linking local and national markets to form regional or even global ones. The global financial crisis of 2008 demonstrated once more that financial interdependence can be both a blessing and a curse. It facilitates the movement of capital and the expansion of credit, and as such promotes economic development in good times; however, in bad times it transmits liquidity shortages throughout the system triggering financial crises and economic recessions where credit expansion earlier fuelled expansion and growth. A critical question therefore is how to structure the governance of transnational …