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Full-Text Articles in Law
Deconstructing Equity: Public Ownership, Agency Costs, And Complete Capital Markets, Ronald J. Gilson, Charles K. Whitehead
Deconstructing Equity: Public Ownership, Agency Costs, And Complete Capital Markets, Ronald J. Gilson, Charles K. Whitehead
Faculty Scholarship
The traditional law and finance focus on agency costs presumes that the premise that diversified public shareholders are the cheapest risk bearers is immutable. In this Essay, we raise the possibility that changes in the capital markets have called this premise into question, drawn into sharp relief by the recent private equity wave in which the size and range of public companies being taken private expanded signficantly. In brief, we argue that private owners, in increasingly complete markets, can transfer risk in discrete slices to counterparties who, in turn, can manage or otherwise diversify away those risks they choose to …
Market Damages, Efficient Contracting, And The Economic Waste Fallacy, Alan Schwartz, Robert E. Scott
Market Damages, Efficient Contracting, And The Economic Waste Fallacy, Alan Schwartz, Robert E. Scott
Faculty Scholarship
Market damages are the best default rule when parties trade in thick markets: They induce parties to contract efficiently and to trade if and only if trade is efficient, and they do not create ex ante inefficiencies. Courts commonly overlook these virtues, however, when promisors bundle services that are not separately priced. For example, a promisor may agree to pay royalties on a mining lease and later to restore the promisee's property. When the cost of completion is large relative to the "market delta " – the increase in market value – courts concerned with avoiding "economic waste" limit the …