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Series

SSRN

Columbia Law School

Law and Economics

2001

Articles 1 - 11 of 11

Full-Text Articles in Law

A Defense Of Shareholder Favoritism, Stephen J. Choi, Eric L. Talley Jan 2001

A Defense Of Shareholder Favoritism, Stephen J. Choi, Eric L. Talley

Faculty Scholarship

This paper considers the efficiency implications of managerial "favoritism" towards block shareholders of public corporations. While favoritism can take any number of forms (including the payment of green-mail, diversion of opportunities, selective information disclosure, and the like), each may have the effect (if not the intent) of securing a block shareholder's loyalty in order to entrench management. Accordingly, the practice of making side payments is commonly perceived to be contrary to other shareholders' interests and, more generally, inefficient. In contrast to this received wisdom, we argue that when viewed ex ante, permissible acts of patronage toward block shareholders may ...


Frictions As A Constraint On Tax Planning, David M. Schizer Jan 2001

Frictions As A Constraint On Tax Planning, David M. Schizer

Faculty Scholarship

In recent years, the government has enacted a series of narrow tax reforms targeting specific planning strategies. Sometimes these reforms stop the targeted planning, but sometimes they merely prompt a new, more wasteful variation. The difference often lies in so-called frictions, which are constraints on tax planning other than the tax law, such as fees, accounting or regulatory treatment, credit risk, and the like. While frictions are important, reformers often lack key information, and legal academics should help provide it. This Article offers general observations about frictions that deter end runs. Most promising are strong "discontinuous" frictions that impose significant ...


Do Norms Matter?: A Cross-Country Examination Of The Private Benefits Of Control, John C. Coffee Jr. Jan 2001

Do Norms Matter?: A Cross-Country Examination Of The Private Benefits Of Control, John C. Coffee Jr.

Faculty Scholarship

Recent empirical work has found that the private benefits of control differ significantly depending upon the underlying legal system in which the firm is incorporated. In particular, common law systems appear to outperform French civil law systems, but are trumped in turn by Scandinavian civil law systems. This evidence could be read to support the "law matters" thesis first advanced by Professors LaPorta, Lopez-de-Silanes, Shleifer and Vishny, which finds that "common law" legal systems incorporate superior legal protections for minority shareholders and therefore have deeper capital markets and more dispersed ownership. But the apparent superiority of Scandinavian legal systems complicates ...


Tax Constraints On Indexed Options, David M. Schizer Jan 2001

Tax Constraints On Indexed Options, David M. Schizer

Faculty Scholarship

Indexed stock option grants reward executives for outperforming a benchmark, such as the market as a whole or competitors in the same industry. These options offer superior incentives by diminishing the influence of factors beyond an executive's control, such as general market and industry conditions. Yet indexed options are almost never used. Professor Saul Levmore seeks to explain this puzzle with norms. The main point of this comment on his Article is that tax plays a larger role in this puzzle than Professor Levmore acknowledges, although tax is not a complete explanation. The tax appeal of traditional options is ...


Playing Favorites With Shareholders, Stephen J. Choi, Eric L. Talley Jan 2001

Playing Favorites With Shareholders, Stephen J. Choi, Eric L. Talley

Faculty Scholarship

Many scholars agree that a robust market for corporate control provides a critical check on managerial opportunism within public corporations. Even prior to a tender offer, the specter of a takeover provides a powerful mechanism for aligning the incentives of managers and shareholders. Conventional wisdom, therefore, views with suspicion any practice that retards the takeover threat looming over managers who perform poorly. One such practice that has garnered particular attention of late is managerial "favoritism" towards influential block shareholders. Favoritism can take any number of forms, ranging from preferential stock subscriptions, to selective information disclosure, to outright cash payments. But ...


Lipton And Rowe's Apologia For Delaware: A Short Reply, Ronald J. Gilson Jan 2001

Lipton And Rowe's Apologia For Delaware: A Short Reply, Ronald J. Gilson

Faculty Scholarship

In Unocal Fifteen Years Later I offered a respectful but negative assessment of the Delaware Supreme Court's post-Unocal efforts to walk a line between managerialists who believe directors should be able to block a hostile takeover, and those who believe the ultimate decision whether to accept a takeover bid belongs to the shareholders. I suggested that Delaware law could be repositioned without requiring the Delaware Supreme Court to confess error by allowing shareholder adopted bylaws that repeal or amend poison pills. Martin Lipton and Paul Rowe responded to my essay by arguing that recent economic challenges to efficient market ...


Unocal Fifteen Year Later (And What We Can Do About It), Ronald J. Gilson Jan 2001

Unocal Fifteen Year Later (And What We Can Do About It), Ronald J. Gilson

Faculty Scholarship

The coincidence of the new millennium and the fifteenth anniversary of the Delaware Supreme Court's announcement of a new approach to takeover law provides an occasion to evaluate a remarkable experiment in corporate law; the Delaware Supreme Court's development of an intermediate standard of review for appraising defensive tactics. This assessment reveals that Unocal has developed into an unexplained and likely inexplicable preference that control contests be resolved through elections rather than through market transactions. In doing so, the remarkable struggle between the chancery court and the supreme court for Unocal's soul is canvassed. The author also ...


Publication Rules In The Rulemaking Spectrum: Assuring Proper Respect For An Essential Element, Peter L. Strauss Jan 2001

Publication Rules In The Rulemaking Spectrum: Assuring Proper Respect For An Essential Element, Peter L. Strauss

Faculty Scholarship

The American rulemaking spectrum ranges from one Constitution, through hundreds of congressional statutes, thousands of administrative regulations, and tens of thousands of important guidance documents to innumerable more casual agency documents such as press releases or letters of advice. Our legal system treats constitutions, statutes and regulations, if valid, as binding text, subject only to the requirements that they be authorized by the superior authority and appropriately adopted following designated procedures; if valid, each of them has legislative effect on government and citizen alike, until displaced by another text validly adopted at the same or a higher level. The innumerable ...


Credit Cards And Debit Cards In The United States And Japan, Ronald J. Mann Jan 2001

Credit Cards And Debit Cards In The United States And Japan, Ronald J. Mann

Faculty Scholarship

This article is an exploration in the tradition of new institutional economics of the possibility that institutional conditions have a significant role in determining the success of credit cards and debit cards. The article examines differences in credit-card and debit-card usage between the United States and Japan. Although I do not doubt that social and psychological factors have some significance, I contend that three institutional factors also have useful explanatory power: the freedom of banks to enter the industry; low telecommunication costs, and the size of the market.

The article provides a detailed description of card usage in the two ...


The Methodological Commitments Of Contemporary Contract Theory, Jody S. Kraus Jan 2001

The Methodological Commitments Of Contemporary Contract Theory, Jody S. Kraus

Faculty Scholarship

Autonomy and economic theories of contract seem to provide incompatible accounts of contract law. In this Chapter, I argue that what appear to be first-order disagreements over particular contract doctrines are really implicit second-order disagreements reflecting the divergent methodological commitments of autonomy and economic theories. I argue that autonomy theories accord priority to the normative project of justifying existing contract doctrine, treat contract law as consisting in the plain meaning of doctrine, require contract theory to explain the distinctive character of contract law, and take the ex post perspective in adjudication. In contrast, economic theories accord priority to the positive ...


The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence And The Governance Of Accounting, John C. Coffee Jr. Jan 2001

The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence And The Governance Of Accounting, John C. Coffee Jr.

Faculty Scholarship

The role of "gatekeepers" as reputational intermediaries who can be more easily deterred than the principals they serve has been developed in theory, but less often examined in practice. Initially, this article seeks to define the conditions under which gatekeeper liability is likely to work – and, correspondingly, the conditions under which it is more likely to fail. Then, after reviewing the recent empirical literature on earnings management, it concludes that the independent auditor does not today satisfy the conditions under which gatekeeper liability should produce high law compliance. A variety of explanations – poor observability, implicit collusion, and high agency costs ...