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Full-Text Articles in Law

Innovation In Corporate Law, Katharina Pistor, Yoram Keinan, Jan Kleinheisterkamp, Mark D. West Jan 2003

Innovation In Corporate Law, Katharina Pistor, Yoram Keinan, Jan Kleinheisterkamp, Mark D. West

Faculty Scholarship

In most countries large business enterprises today are organized as corporations. The corporation with its key attributes of independent personality, limited liability and free tradeability of shares has played a key role in most developed market economies since the 19th century and has made major inroads in emerging markets. We suggest that the resilience of the corporate form is a function of the adaptability of the legal framework to a changing environment. We analyze a country's capacity to innovate using the rate of statutory legal change, the flexibility of corporate law, and institutional change as indicators. Our findings suggest ...


Unregulable Defenses And The Perils Of Shareholder Choice, Jennifer Arlen, Eric L. Talley Jan 2003

Unregulable Defenses And The Perils Of Shareholder Choice, Jennifer Arlen, Eric L. Talley

Faculty Scholarship

A number of corporate law scholars have recently proposed granting shareholders an enhanced right to oversee the use of takeover defenses. While these "shareholder choice" proposals vary somewhat in their content, they generally agree that shareholder oversight is justified if and only if shareholders hold a bona fide advantage over managers in evaluating and responding to hostile bids. This article challenges that basic premise, arguing that even if shareholders enjoy a comparative advantage over management in reacting to hostile bids, it does not follow that a shareholder choice regime is value enhancing, because it would give managers an incentive to ...


Atkins, Adolescence And The Maturity Heuristic: Rationales For A Categorical Exemption For Juveniles From Capital Punishment, Jeffrey Fagan Jan 2003

Atkins, Adolescence And The Maturity Heuristic: Rationales For A Categorical Exemption For Juveniles From Capital Punishment, Jeffrey Fagan

Faculty Scholarship

In Atkins v. Virginia, the U.S. Supreme Court held that mentally retarded people lacked a range of developmental capacities that were necessary to establish the higher threshold of culpability for the execution of murderers in the Court's death penalty jurisprudence. The Court emphasized that the impairments of mental retardation lead to a ... special risk of wrongful execution. The Court had previously concluded that the limitations in developmental capacities that characterize mentally retarded defendants also characterize a significant proportion of adolescent offenders. These parallels invite an extension of the Atkins Court's reasoning to juveniles by highlighting the diminished ...


Local Institutions, Foreign Investment And Alternative Strategies Of Development: Some Views From Practice, Tamara Lothian, Katharina Pistor Jan 2003

Local Institutions, Foreign Investment And Alternative Strategies Of Development: Some Views From Practice, Tamara Lothian, Katharina Pistor

Faculty Scholarship

This Essay summarizes the major insights gained from a panel discussion with legal practitioners about the relevance of local institutions to foreign direct investors. The Essay offers a critique of policy conclusions drawn from empirical studies that suggest a positive correlation between legal institutions and foreign investment flows. It points out that the data used in these studies are far too general to allow policy conclusions and that neither the data nor the policy conclusions are sufficiently attuned to the challenges or opportunities that foreign direct investment projects face on the ground. According to the results of the panel discussion ...


Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson Jan 2003

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

Faculty Scholarship

The venture capital market and firms whose creation and early stages were financed by venture capital are among the crown jewels of the American economy. Beyond representing an important engine of macroeconomic growth and job creation, these firms have been a major force in commercializing cutting-edge science, whether through their impact on existing industries as with the radical changes in pharmaceuticals catalyzed by venture-backed firms' commercialization of biotechnology, or by their role in developing entirely new industries as with the emergence of the Internet and World Wide Web. The venture capital market thus provides a unique link between finance and ...


Unregulable Defenses And The Perils Of Shareholder Choice, Jennifer Arlen, Eric L. Talley Jan 2003

Unregulable Defenses And The Perils Of Shareholder Choice, Jennifer Arlen, Eric L. Talley

Faculty Scholarship

A number of corporate law scholars have recently proposed granting shareholders an enhanced right to oversee the use of takeover defenses. While these "shareholder choice" proposals vary somewhat in their content, they generally agree that shareholder oversight is justified if and only if shareholders hold a bona fide advantage over managers in evaluating and responding to hostile bids. This article challenges that basic premise, arguing that even if shareholders enjoy a comparative advantage over management in reacting to hostile bids, it does not follow that a shareholder choice regime is value enhancing, because it would give managers an incentive to ...


Controlling Controlling Shareholders, Ronald J. Gilson, Jeffrey N. Gordon Jan 2003

Controlling Controlling Shareholders, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

The rules governing controlling shareholders sit at the intersection of the two facets of the agency problem at the core of public corporations law. The first is the familiar principal-agency problem that arises from the separation of ownership and control. With only this facet in mind, a large shareholder may better police management than the standard panoply of market-oriented techniques. The second is the agency problem that arises between controlling and non-controlling shareholders, which produces the potential for private benefits of control. There is, however, a point of tangency between these facets. Because there are costs associated with holding a ...


The Mechanisms Of Market Efficiency Twenty Years Later: The Hindsight Bias, Ronald J. Gilson, Reinier Kraakman Jan 2003

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 ...


What Caused Enron?: A Capsule Social And Economic History Of The 1990'S, John C. Coffee Jr. Jan 2003

What Caused Enron?: A Capsule Social And Economic History Of The 1990'S, John C. Coffee Jr.

Faculty Scholarship

Between January 1997 and June 2002, approximately 10% of all listed companies in the United States announced at least one financial statement restatement. The stock prices of restating companies declined 10% on average on the announcement of these restatements, with restating firms losing over $100 billion in market capitalization over a short three day trading window surrounding these restatements. Such generalized financial irregularity requires a more generic causal explanation than can be found in the facts of Enron, WorldCom or other specific case histories.

Several different explanations are plausible, each focusing on a different actor (but none giving primary attention ...


Contract Theory And The Limits Of Contract Law, Alan Schwartz, Robert E. Scott Jan 2003

Contract Theory And The Limits Of Contract Law, Alan Schwartz, Robert E. Scott

Faculty Scholarship

This article sets out a normative theory to guide decisionmakers in the regulation of contracts between firms. Commercial law for centuries has drawn a distinction between mercantile contracts and others, but modern scholars have not systematically pursued the normative implications of this distinction. We attempt to cure this neglect by setting out the theoretical foundations of a law merchant for our time. Firms contract to maximize expected surplus and the state permits markets to function because markets maximize social welfare. Thus, there is a correspondence of interest between firms and the state, which implies that, when externalities are absent, the ...