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Series

SSRN

Columbia Law School

Law and Economics

2002

Articles 1 - 9 of 9

Full-Text Articles in Law

Economic Development, Competition Policy, And The World Trade Organization, Bernard Hoekman, Petros C. Mavroidis Jan 2002

Economic Development, Competition Policy, And The World Trade Organization, Bernard Hoekman, Petros C. Mavroidis

Faculty Scholarship

At the recent WTO ministerial meeting in Doha, Qatar, WTO members called for the launch of negotiations on disciplines relating to competition, on the basis of explicit consensus on modalities to be agreed at the 5th WTO ministerial in 2003. Discussions in WTO since 1997 have revealed little support for ambitious multilateral action. Proponents of WTO antitrust disciplines currently propose an agreement that is limited to ‘core principles’ – nondiscrimination, transparency, and provisions banning ‘hard core’ cartels. We argue that an agreement along such lines will create compliance costs for developing countries while not addressing the anticompetitive behavior of firms located ...


Incomplete Law – A Conceptual And Analytical Framework And Its Application To The Evolution Of Financial Market Regulation, Katharina Pistor, Chenggang Xu Jan 2002

Incomplete Law – A Conceptual And Analytical Framework And Its Application To The Evolution Of Financial Market Regulation, Katharina Pistor, Chenggang Xu

Faculty Scholarship

This paper develops a conceptual framework for the analysis of legal institutions. It argues that law is inherently incomplete and that the incompleteness of law has a profound impact on the design of lawmaking and law enforcement institutions. When law is incomplete, residual lawmaking powers must be allocated; and enforcement agents have to be vested with law enforcement powers. The optimal allocation of lawmaking and law enforcement powers under incomplete law is analyzed with a focus on the legislature, regulators and courts as possible lawmakers, and courts as well as regulators as possible law enforcers. The timing and process of ...


Law Enforcement Under Incomplete Law: Theory And Evidence From Financial Market Regulation, Chenggang Xu, Katharina Pistor Jan 2002

Law Enforcement Under Incomplete Law: Theory And Evidence From Financial Market Regulation, Chenggang Xu, Katharina Pistor

Faculty Scholarship

This paper studies the design of law-making and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure, defined as the social-welfare loss that results from the regime's inability to deter harmful actions. As a potential remedy a regulatory regime is introduced. The major functional difference between courts and regulators is that courts enforce law reactively, that is only once others have initiated law enforcement procedures, while regulators enforce law proactively, i.e. on their own initiative. Proactive law enforcement may be superior in preventing ...


Understanding Venture Capital Structure: A Tax Explanation For Convertible Preferred Stock, Ronald J. Gilson, David M. Schizer Jan 2002

Understanding Venture Capital Structure: A Tax Explanation For Convertible Preferred Stock, Ronald J. Gilson, David M. Schizer

Faculty Scholarship

The capital structures of venture capital-backed U.S. companies share a remarkable commonality: overwhelmingly, venture capitalists make their investments through convertible preferred stock. Not surprisingly, a large part of the academic literature on venture capital has sought to explain this peculiar pattern. Financial economists have developed models showing, for example, that convertible securities allocate control depending on the portfolio company's success, operate as a signal to overcome various kinds of information asymmetry, and align the incentives of entrepreneurs and venture capital investors. In this Article we extend this literature by examining the influence of a more mundane factor, tax ...


Free Riding On Hot Wheels, Victor P. Goldberg Jan 2002

Free Riding On Hot Wheels, Victor P. Goldberg

Faculty Scholarship

When warehouse clubs started making inroads into its market, Toys R Us responded with a policy designed to limit the clubs' access to certain toys. The FTC successfully challenged the policy, arguing that TRU had coordinated a horizontal agreement amongst the toy manufacturers to eliminate competition from this new class of competitors. TRU defended itself, invoking the free-rider rationale. This the Commission rejected as pretext. TRU's argument was better than the Commission gave it credit for, but it failed to press its best argument. That failure stems in part from the shortcomings of the standard free rider formulation, and ...


Racing Towards The Top?: The Impact Of Cross-Listings And Stock Market Competition On International Corporate Governance, John C. Coffee Jr. Jan 2002

Racing Towards The Top?: The Impact Of Cross-Listings And Stock Market Competition On International Corporate Governance, John C. Coffee Jr.

Faculty Scholarship

During the 1990's, the phenomenon of cross-listing by issuers on international exchanges accelerated, with the consequence in the case of some emerging markets that trading followed, draining the original market of its liquidity. Traditionally, cross-listing has been viewed as an attempt to break down market segmentation and reach trapped pools of liquidity in distant markets. The globalization of financial markets, however, renders this explanation increasingly dated. A superior explanation is "bonding:" issuers migrate to U.S. exchanges in particular because by voluntarily subjecting themselves to the U.S.'s higher disclosure standards and greater threat of enforcement (both by ...


Understanding Enron: "It's About The Gatekeepers, Stupid", John C. Coffee Jr. Jan 2002

Understanding Enron: "It's About The Gatekeepers, Stupid", John C. Coffee Jr.

Faculty Scholarship

Debacles of historic dimensions tend to produce an excess of explanations. So has it been with Enron, as virtually every commentator has a different diagnosis and a different prescription. Yet, in most respects, Enron is a maddeningly idiosyncratic example of pathological corporate governance, which by itself cannot provide evidence of systematic governance failure. Properly understood, however, the Enron debacle furnishes a paradigm of "gatekeeper failure" – that is, of why and when reliance may not be justified on "reputational intermediaries," such as auditors, securities analysts, attorneys, and other professionals who pledge their reputational capital to vouch for information that investors cannot ...


Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson Jan 2002

Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson

Faculty Scholarship

This paper seeks to identify the core of the U.S. venture capital contracting model, and then assess the extent to which the model provides guidance in engineering venture capital markets in other countries and, in particular, in identifying a viable role for government in assisting that project. All financial contracts respond to three central contracting problems: uncertainty, information asymmetry and opportunism in the form of agency costs. The special character of venture capital contracting is shaped by the fact that investing in early stage, high technology companies presents these problems in extreme form. The genius of U.S. venture ...


Trade, Law, And Product Complexity, Daniel Berkowitz, Johannes Moenius, Katharina Pistor Jan 2002

Trade, Law, And Product Complexity, Daniel Berkowitz, Johannes Moenius, Katharina Pistor

Faculty Scholarship

How does the quality of national institutions that enforce the rule of law influence international trade? Anderson and Marcouiller (2001) argue that bad institutions located in the importer's country deter international trade because they enable economic predators to steal and extort rents at the importer's border. We complement this research and show how good institutions located in the exporter's country enhance international trade, in particular, trade in complex products whose characteristics are difficult to fully specify in a contract. We argue that both exporter and importer institutions impact international as well as domestic transaction costs in complex ...