Business Commons^™

An Empirical Analysis Of Cost Recovery In Superfund Cases: Implications For Brownfields And Joint And Several Liability, Howard F. Chang, Hilary Sigman

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Economic theory developed in the prior literature indicates that under the joint and several liability imposed by the federal Superfund statute, the government should recover more of its costs of cleaning up contaminated sites than it would under nonjoint liability, and the amount recovered should increase with the number of defendants and with the independence among defendants in trial outcomes. We test these predictions empirically using data on outcomes in federal Superfund cases. Theory also suggests that this increase in the amount recovered may discourage the sale and redevelopment of potentially contaminated sites (or “brownfields”). We find the increase to …

Antitrust, The Internet, And The Economics Of Networks, Christopher S. Yoo, Daniel F. Spulber

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Network industries, including the Internet, have shown significant growth, substantial competition, and rapid innovation. This Chapter examines antitrust policy towards network industries. The discussion considers the policy implications of various concepts in the economics of networks: natural monopoly, network economic effects, vertical exclusion, and dynamic efficiency. Our analysis finds that antitrust policy makers should not presume that network industries are more subject to monopolization than other industries. We find that deregulation and the strength of competition in network industries have removed justifications for structural separation as a remedy. Also, we argue that that deregulation and competition have effectively eliminated support …

The Marginalist Revolution In Corporate Finance: 1880-1965, Herbert J. Hovenkamp

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During the late nineteenth and early twentieth centuries fundamental changes in economic thought revolutionized the theory of corporate finance, leading to changes in its legal regulation. The changes were massive, and this branch of financial analysis and law became virtually unrecognizable to those who had practiced it earlier. The source of this revision was the marginalist, or neoclassical, revolution in economic thought. The classical theory had seen corporate finance as an historical, relatively self-executing inquiry based on the classical theory of value and administered by common law courts. By contrast, neoclassical value theory was forward looking and as a result …

Introduction To Creation Without Restraint: Promoting Liberty And Rivalry In Innovation, Christina Bohannan, Herbert J. Hovenkamp

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This document contains the table of contents, introduction, and a brief description of Christina Bohannan & Herbert Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation (Oxford 2011).

Promoting rivalry in innovation requires a fusion of legal policies drawn from patent, copyright, and antitrust law, as well as economics and other disciplines. Creation Without Restraint looks first at the relationship between markets and innovation, noting that innovation occurs most in moderately competitive markets and that small actors are more likely to be truly creative innovators. Then we examine the problem of connected and complementary relationships, a dominant feature of …

Tracking Berle's Footsteps: The Trail Of The Modern Corporation's Law Chapter, William W. Bratton, Michael L. Wachter

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No abstract provided.

A Comprehensive Theory Of Deal Structure: Understanding How Transactional Structure Creates Value, Michael S. Knoll, Daniel M. G. Raff

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No abstract provided.

Passive Discrimination: When Does It Make Sense To Pay Too Little?, Jonah B. Gelbach, Jonathan Klick, Lesley Wexler

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Economists have long recognized employers’ ability to construct benefits packages to induce workers to sort themselves into and out of jobs. For instance, to encourage applications from individuals with a highly valued but largely unobservable characteristic, such as patience, employers might offer benefits that patient individuals are likely to value more than other individuals. By offering a compensation package with highly valued benefits but a relatively low wage, employers will attract workers with the favored characteristic and discourage other individuals from applying for or accepting the job. While economic theory generally views this kind of self-selection in value neutral terms, …

Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp

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"Separation of ownership and control" is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means' The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within …

Federalism, Variation, And State Regulation Of Franchise Termination, Jonathan Klick, Bruce Kobayashi, Larry Ribstein

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This article discusses and expands on our recent work examining the effects of franchise-termination laws. In a prior article, we examined empirically the effect of franchise-termination laws on the level of franchise activity. Our analysis improved upon the prior literature in two major ways. First, our work exploited two new sources of panel data to provide new empirical evidence on the effect of franchise termination laws. Second, our analysis examined variation in states’ restrictions on the ability of franchisors and franchisees to contract around a particular state’s regulation. We found that the effects of termination laws on the overall level …

Agency Costs, Charitable Trusts, And Corporate Control: Evidence From Hershey's Kiss-Off, Jonathan Klick, Robert H. Sitkoff

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In July 2002 the trustees of the Milton Hershey School Trust announced a plan to diversify the Trust’s investment portfolio by selling the Trust’s controlling interest in the Hershey Company. The Company’s stock jumped from $62.50 to $78.30 on news of the proposed sale. But the Pennsylvania Attorney General, who was then running for governor, opposed the sale on the ground that it would harm the local community. Shortly after the Attorney General obtained a preliminary injunction, the trustees abandoned the sale and the Company’s stock dropped to $65.00. Using standard event study methodology, we find that the sale announcement …

Private Equity's Three Lessons For Agency Theory, William W. Bratton

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No abstract provided.

The Disadvantages Of Immigration Restriction As A Policy To Improve Income Distribution, Howard F. Chang

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In this Article, I argue that tax and transfer policies are more efficient than immigration restrictions as instruments for raising the after tax incomes of the least skilled native workers. Policies to protect these native workers frol1'l immigrant competition in the labor market do no better at promoting distributive justice and are likely to impose a greater economic burden on natives in the country of immigration than the tax alternative. These immigration restrictions are especially costly given the disproportionate burden that they place on households with working women, which discourages fel1'wle participation in the labor force. This burden runs contrary …

The Legal Periphery Of Dominant Firm Conduct, Herbert J. Hovenkamp

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This essay explores two different but related problems and how U.S. antitrust law and EU competition law approach them. The first is the offense of attempt to monopolize, which concerns the acts that a firm that is not yet dominant might undertake in order to become dominant. The second is the offense of monopoly or dominant firm leveraging, which occurs when a firm uses its dominant position in one market to cause some kind of harm in a different market where it also does business.

The language of EU and U.S. provisions concerning dominant firms provokes one to think that …

Reasonable Emissions Of Greenhouse Gases: Efficient Abatement For A Stock Pollutant, Howard F. Chang

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No abstract provided.

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

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The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge corporate …

The New Dividend Puzzle, William W. Bratton

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No abstract provided.

The Academic Tournament Over Executive Compensation, William W. Bratton

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No abstract provided.

Rules, Principles, And The Accounting Crisis In The United States, William W. Bratton

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The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly ·when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect. the US reporting system holds out no actor plausibly positioned …

Pari Passu And A Distressed Sovereign's Rational Choices, William W. Bratton

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No abstract provided.

Gaming Delaware, William W. Bratton

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No abstract provided.

Put-Call Parity And The Law, Michael S. Knoll

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A common literary theme is the conflict between appearance and reality. That conflict also frequently arises in the law, where it is usually cast as one between substance and form. Another discipline in which the conflict arises is finance, where it appears in the put-call parity theorem. That theorem states that given any three of the four following financial instruments--a riskless zero-coupon bond, a share of stock, a call option on the stock, and a put option on the stock--the fourth instrument can be replicated. Thus, the theorem implies that any financial position containing these assets can be constructed in …

Delaware Law As Applied Public Choice Theory: Bill Cary And The Basic Course After Twenty-Five Years, William W. Bratton

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No abstract provided.

Bankruptcy Judges And Bankruptcy Venue: Some Thoughts On Delaware, David A. Skeel Jr.

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No abstract provided.

Dividends, Noncontractibility, And Corporate Law, William W. Bratton

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No abstract provided.

An Economic Analysis Of Trade Measures To Protect The Global Environment, Howard F. Chang

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In this article, Professor Howard Chang addresses the role of trade restrictions in supporting policies to protect the global environment and proposes a more liberal treatment of these environmental trade measures than that adopted by dispute-settlement panels of the General Agreement on Tariffs and Trade (GATT). The GATT Secretariat has recommended that countries like the United States rely on "carrots" rather than "sticks" in order to induce the participation of other countries in multilateral environmental agreements. Professor Chang defends the use of sticks on the ground that they encourage more restrained exploitation of the environment pending a multilateral agreement. First, …

"A Nation Of Thieves": Securing Black People's Right To Shop And To Sell In White America, Regina Austin

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No abstract provided.

"An Honest Living": Street Vendors, Municipal Regulation, And The Black Public Sphere, Regina Austin

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No abstract provided.

A Property-Based Theory Of Security Interests: Taking Debtor's Choices Seriously, Steven L. Harris, Charles W. Mooney Jr.

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No abstract provided.

Taxing Prometheus: How The Corporate Interest Deduction Discourages Innovation And Risk-Taking, Michael S. Knoll

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This paper uses recent developments in the theory of optimal capital structure to demonstrate how the federal corporate income tax with an interest deduction, but without a corresponding dividend deduction, misallocates capital within the corporate sector by encouraging investment in low-risk, low-growth projects employing tangible assets over high-risk, high-growth projects employing intangible assets.

Corporate Law Through An Antitrust Lens, Edward B. Rock

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No abstract provided.