Law Commons^™

Valuation Averaging: A New Procedure For Resolving Valuation Disputes, Keith Sharfman

Rutgers Law School (Newark) Faculty Papers

In this Article, Professor Sharfman addresses the problem of "discretionary valuation": that courts resolve valuation disputes arbitrarily and unpredictably, thus harming litigants and society. As a solution, he proposes the enactment of "valuation averaging," a new procedure for resolving valuation disputes modeled on the algorithmic valuation processes often agreed to by sophisticated private firms in advance of any dispute. He argues that by replacing the discretion of judges and juries with a mechanical valuation process, valuation averaging would cause litigants to introduce more plausible and conciliatory valuations into evidence and thereby reduce the cost of valuation litigation and increase the …

The Petrochina Syndrome: Regulating Capital Markets In The Anti-Globalization Era, Stephen F. Diamond

Cornell Law Faculty Working Papers

This article argues that the process of globalization has generated a legitimation deficit that can be the source of wasteful, even destructive, social and political conflict. I stylize this outcome as "the PetroChina Syndrome," after a leading example of the kind of activity generated in response to globalization, the PetroChina Campaign, where a coalition of labor, human rights, environmental, anti-slavery and religious groups worked together to oppose the initial public offering of a major Chinese oil company led by Goldman Sachs. The article begins with a discussion of this important but largely unexplored dimension of the anti-globalization era triggered by …

The Mechanisms Of Market Inefficiency: An Introduction To The New Finance, Lynn A. Stout

Cornell Law Faculty Publications

During the 1970s and early 1980s, the Efficient Capital Market Hypothesis (ECMH) became one of the most widely-accepted and influential ideas in finance economics. More recently, however, the idea of market efficiency has fallen into disrepute as a result of market events and growing empirical evidence of inefficiencies. This essay argues that the weaknesses of the efficient market theory are, and were, apparent from a careful inspection of its initial premises, including the presumptions of homogeneous investor expectations, effective arbitrage, and investor rationality. By the same token, a wide range of market phenomena inconsistent with the ECHM can be explained …

Enron At The Margin, William H. Widen

Articles

No abstract provided.

Financing Chinese Capitalism: Principal Banks, Economic Crisis, And Chinese Family Firms In Singapore, Henry W. Yeung

Cultural Approaches to Asian Financial Markets

It is a widely circulated myth that Chinese family firms rely exclusively on kinship ties and network capital to finance their domestic and international operations. In this empirical paper, I argue that large Chinese family firms are increasingly engaging with financial markets on a global scale. In order to finance their transnational business activities, these firms require financial services from banks beyond their domestic economies, resulting in a growing number and geographical spread of their principal banks. Second, I contend that as these Chinese family firms are diversifying their principal banks beyond a narrow confinement to other Chinese family-owned banks …

Opening Trade In Financial Services – The Chile And Singapore Examples: Hearing Before The H. Subcomm. On Domestic And International Monetary Policy, Trade And Technology, 108th Cong., Apr. 1, 2003 (Statement Of Daniel K. Tarullo, Prof. Of Law, Geo. U. L. Center), Daniel K. Tarullo

Testimony Before Congress

No abstract provided.

23rd Annual Conference On Legal Issues For Financial Institutions, Office Of Continuing Legal Education At The University Of Kentucky College Of Law

Continuing Legal Education Materials

Materials from the 23rd Annual Conference on Legal Issues for Financial Institutions held by UK/CLE in April of 2003.

Advisory Fees: Evolving Theories, Tamar Frankel

Faculty Scholarship

The theories on which mutual fund advisers' fiduciary and advisory fees are based have evolved over time. They were changed to justify different public policy approaches and reflect different perceptions of the relationships between advisers and investors. Three theories have developed on the subject and yet another is percolating currently. The familiar context in which these theories arose is revisited to clarify their development.

The Uniform Consumer Leases Act Arrives In Connecticut, Ralph J. Rohner

Scholarly Articles

No abstract provided.

Central Banks’ Role In Bank Supervision In The United States And United Kingdom, Heidi Mandanis Schooner

Scholarly Articles

Driven in part by the question of bank supervision in euro-area countries, a growing body of literature addresses whether central banking and bank supervision should be combined. This paper address this debate in light of recent legislation in the United Kingdom and the United States. Recent legislation in the United Kingdom stripped the Bank of England of its responsibility for bank supervision and established the Financial Services Authority as an integrated supervisor of financial services. In the United States, the Gramm-Leach-Bliley Act of 1999 expanded the regulatory authority of the Federal Reserve. In light of international trends, I consider how …

Bringing Out The Big Guns: The Usa Patriot Act, Money Laundering, And The War On Terrorism, Eric J. Gouvin

Faculty Scholarship

This Article addresses the question of whether the money laundering provisions in the Patriot Act will be effective tools in the effort to intercept terrorist financing to prevent future attacks like those suffered on September 11, 2001, or whether the legislation is instead the modern equivalent of a big noisy anti-aircraft gun -- psychologically useful for showing that something is being done, but not very effective in actually doing the task. This Article concludes that the Act's money laundering provisions will not be effective in intercepting terrorist financing. It reaches that conclusion after examining the current state of United States …

Using The World Bank Inspection Panel To Defend The Interests Of Project-Affected People, David Hunter

Articles in Law Reviews & Other Academic Journals

No abstract provided.

Accountants Make Miserable Policemen: Rethinking The Federal Securities Laws, Jerry W. Markham

Faculty Publications

This Article describes the background of the federal securities laws and the assumptions about full disclosure that where made to justify the intrusive legislation. It also considers the problems encountered by the SEC in the nearly seven decades that have passed since the Stock Market Crash of 1929 and then reviews the market meltdown over the last three years and describes how full disclosure regulation failed. Finally, the author focuses on a principal flaw in the system – the misguided effort to turn accountants into policeman.

The Implied Waiver Solution To The Problem Of Privilege In The Individual Bankruptcy Case, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Making Sense Of Successor Liability, Marie T. Reilly

Journal Articles

A firm that buys assets from another firm ordinarily does not acquire liability to the seller's creditors simply by buying its assets. This ordinary rule is subject to important exceptions. The buyer's consent triggers an exception. If a buyer agrees to assume the seller's liability to third parties, it is for that reason liable. This article considers a more controversial exception - successor liability. When a court decides that an asset acquirer should be treated as a "successor" to the transferor, it is liable for the transferor's debts as though it were the transferor.

The Irony Of International Letters Of Credit: They Aren’T Secure, But They (Usually) Work, Margaret L. Moses

Faculty Publications & Other Works

No abstract provided.

Questions To Ask Before You Join A Club, Laura N. Beny, Paul S. Bird, Franci J. Blassberg, Michael P. Harrell

Articles

Despite the recent flurry of large transactions in which a consortium of private equity firms have teamed up to make joint bids and acquisitions, “club deals” themselves are not breaking news. In fact, they have been a staple of small- and middle-sized private equity M&A transactions for years. Recently, however, there has been a growing trend toward large club deals with enterprise values over $1 billion.1 Due to their size, complexity and, often, international dimension, these transactions have generated considerable attention in the business press and have prompted much discussion among private equity professionals and the limited partners whose money …

Secrets Of Bank Regulation: A Reply To Professor Cohen, Heidi Mandanis Schooner

Scholarly Articles

No abstract provided.

Leasing Consumer Goods: The Spotlight Shifts To The Uniform Consumer Leases Act, Ralph J. Rohner

Scholarly Articles

As a participant throughout the drafting process for the Uniform Consumer Leases Act ("U.C.L.A." or "the Act"), I believe that the Act deserves serious consideration in the state legislatures to fill gaps in existing consumer protections for consumer lessees. The Act complements the Uniform Commercial Code ("U.C.C.") Article 2A (Leases), which creates a basic legal framework for all leases of goods, commercial and consumer alike, and the federal Consumer Leasing Act, which prescribes advertising and disclosure rules for consumer leases. The U.C.L.A. is also intended to reinforce, or be reinforced by, certain existing state laws, such as those prohibiting unfair …

Investor Skepticism V. Investor Confidence: Why The New Research Analyst Reforms Will Harm Investors, John L. Orcutt

Law Faculty Scholarship

Part I of this Article provides an overview of research analysts and their basic functions, including a discussion of sell-side analysts' role in the market's recent boom and bust. Part II examines the conflicts of interest that have plagued sell-side research, and Part III reviews the Regulatory Actions that are meant to address these conflicts. In Part IV, the author will make the case for encouraging, rather than lessening, investor skepticism in sell-side research and will explain why the Regulatory Actions are not likely to improve the performance of sell-side analysts. Finally, Part V will offer a simpler proposal to …

Culture Clash? The Miller & Modigliani Propositions Meet The United States Court Of Federal Claims, Rodger D. Citron

Scholarly Works

No abstract provided.

The Mechanisms Of Market Efficiency Twenty Years Later: The Hindsight Bias, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Twenty years ago we published a paper, "The Mechanisms of Market Efficiency," that sought to describe the institutional underpinnings of price formation in the securities market. Since that time, financial economics has moved forward on many fronts. The sub-discipline of behavioral finance has struggled to bring yet more descriptive realism to the study of financial markets. Two important questions are (1) how much has this new discipline changed our understanding of the efficiency and nature of the institutional mechanisms that set price in financial markets; and (2) how far does this discipline carry novel implications for the regulation of financial …

Frictions And Tax-Motivated Hedging: An Empirical Exploration Of Publicly-Traded Exchangeable Securities, William M. Gentry, David M. Schizer

Faculty Scholarship

As financial engineering becomes more sophisticated, taxing income from capital becomes increasingly difficult. We offer the first empirical study of a high profile strategy known as "taxfree hedging," which offers economic benefits of a sale without tnggering tax. We explore nontax costs that taxpayers face when hedging by issuing so-called "DECS," "PHONES," and other publicly-traded exchangeable securities. Focusing on 61 transactions between 1993 and 2001, we shed light on why taxpayers might prefer to hedge through private "over-the-counter" transactions: An offering of exchangeable securities is announced in advance and implemented all at once, triggering an almost 4 percent decline in …

Business Divisions From The Perspective Of The U.S. Banking System , Carl Felsenfeld, Genci Bilali

Faculty Scholarship

The Bank Holding Company Act of 1956 ("Act"),' as amended, most recently in 1999 by the Gramm-Leach-Bliley Act ("GLB") divides all economic activity into five groups. These groups are: 1) banking, 2) activities closely related to and a proper incident to banking; 3) activities of a financial nature; 4) activities complimentary to those of a financial nature; and 5) activities not of a financial nature. This article will explore these five groups of activities separately. The policies behind the divisions will be analyzed and questioned whether they serve the policies behind the Act. This article will also question whether the …

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, much 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 efficiently allocate control between the investor and entrepreneur,signal the entrepreneur's talent and motivation, and align the incentives of entrepreneurs and venture capitalists.

In this Article, we examine the influence of a more mundane factor on venture capital structure: tax law. Portfolio companies issue convertible preferred stock to achieve more favorable …

The Impact Of Opt-In Privacy Rules On Retail Credit Markets: A Case Study Of Mbna, Fred H. Cate, Michael Staten

Articles by Maurer Faculty

U.S. privacy laws are increasingly moving from a presumption that consumers must object to ("opt out" of) uses of personal data they wish to prohibit to a requirement that they must explicitly consent ("opt in") to uses they wish to permit. Despite the growing reliance on opt-in rules, there has been little empirical research on their costs. This Article examines the impact of opt-in on MBNA Corporation, a diversified, multinational financial institution. The authors demonstrate that opt-in would raise account acquisition costs and lower profits, reduce the supply of credit and raise credit card prices, generate more offers to uninterested …

Takeover Defense When Financial Markets Are (Only) Relatively Efficient, Michael L. Wachter

All Faculty Scholarship

This paper evaluates the impact of developments in the understanding of asset value pricing for alternative legal standards for takeover defenses: the management discretion and the shareholder rights positions. Both sides place considerable, albeit implicit, reliance on alternative views of the efficiency of financial markets. Developments in finance theory show that when financial markets are only "relatively efficient," stock prices can incorrectly value the corporation at any point in time, at the same time as investors cannot outperform the market on an ongoing basis. I focus on financial market anomalies arising from the failure of the capital asset pricing model …

United Kingdom And United States Responses To The Regulatory Challenges Of Modern Financial Markets, Heidi Mandanis Schooner

Scholarly Articles

The modernization of world financial markets over the last 20 years has raised profound regulatory challenges. Our article considers whether the United States' Gramm-Leach-Bliley Act of 1999 (GLB) and the United Kingdom's Financial Services and Markets Act 2000 (FSMA) meet those challenges. We posit that the most compelling regulatory issue is not whether the financial industry should be allowed to consolidate. Rather, we believe that the organization and practices of the regulators, i.e., the question of which agencies regulate which firms and under what set of laws, should be the focal point. We call this an issue of regulatory modernization. …

Diffusing Environmental Regulation Through The Financial Services Sector: Reforms In The Eu And Other Jurisdictions, Benjamin J. Richardson

Articles & Book Chapters

The financial services sector has the potential to be an important facet of future systems of environmental governance. But, so far, only ad hoc policy initiatives have arisen in the EU and other countries addressing the environmental roles of banks or insurers. Because the financial services sector is where wholesale decisions regarding future development, and thus pressures on the environment, arise, reform of investment, banking and insurance services to promote long term investment and better consideration of environmental impacts may be an effective way to promote sustainable development. Reforms such as corporate environmental reporting requirements, mandatory environmental liability insurance, and …

Settlement Finality And Associated Risks In Funds Transfers – When Does Interbank Payment Occur?, Benjamin Geva

Articles & Book Chapters

This paper addresses the first meaning of settlement finality, that is, the discharge of the interbank obligation. The discussion focuses on large-value transfer systems, namely, "systematically important" payment systems, and examines settlement finality therein under the provisions of Article 4A of the Uniform Commercial Code-Funds Transfers. Primary attention is given to the various implications of settlement finality under Article 4A, as well as to compliance with the statutory scheme with BIS Core Principles, in conjunction with system rules. Following the present discussion on the meaning of settlement finality, Part 2 of the paper sets out settlement mechanisms in large-value transfer …