Law Commons^™

The Digital Shareholder, Andrew A. Schwartz

Publications

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. …

Tax And Corporate Governance: The Influence Of Tax On Managerial Agency Costs, David M. Schizer

Faculty Scholarship

This chapter examines the influence of tax on managerial agency costs, with particular emphasis on public companies in the United States. Focusing on “C-corporations,” this chapter first considers why tax is an imperfect vehicle for mitigating managerial agency costs. It then discusses how tax influences the compensation of managers, both in ways policy makers intended, and in ways they did not. The chapter also considers how tax affects management decisions about capital structure, hedging, and acquisitions. In addition, this chapter explores the tax system’s influence on the ability and incentives of shareholders to monitor management. This chapter then concludes with …

Addressing Agency Costs Through Private Litigation In The U.S: Tensions, Disappointments, And Substitutes, James D. Cox, Randall S. Thomas

Faculty Scholarship

Many scholars argue that over the past seventy years, shareholder representative litigation has acted as an important policing mechanism of managerial abuses at U.S. public companies. Different types of representative litigation have had their moment in the sun – derivative suits early on, followed by federal securities class actions, and most recently merger litigation – often producing benefits for shareholders, but posing difficult challenges as well. In particular, the benefits are qualified by another concern, the litigation agency costs that surround shareholder suits. This form of agency costs arises since the suits are invariably representative with no requirement that the …

Majority Control And Minority Protection, Zohar Goshen, Assaf Hamdani

Faculty Scholarship

This chapter examines legal issues concerning majority control and minority protection in firms with concentrated ownership governance structures, with particular emphasis on the tradeoff between the goals of protecting minority shareholders and allowing controllers to pursue their vision and how corporate law should balance these conflicting goals. Focusing primarily on Delaware corporate law, it suggests that holding a control block allows majority shareholders to pursue their idiosyncratic vision in the manner they see fit, even against minority investors’ objections. Idiosyncratic vision refers to the subjective value that entrepreneurs attach to their business idea or vision, and this chapter considers its …