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Full-Text Articles in Law
Corporate Legacy, Andrew A. Schwartz
Corporate Legacy, Andrew A. Schwartz
Publications
Many public companies have shed takeover defenses in recent years, on the theory that such defenses reduce share price. Yet new data presented here shows that practically all new public companies--those launching their initial public offering (IPO)--go public with powerful takeover defenses in place. This behavior is puzzling because the adoption of takeover defenses presumably lowers the price at which the pre-IPO shareholders can sell their own shares in and after the IPO. Why would founders and early investors engage in this seemingly counterproductive behavior? Building on prior attempts to solve this mystery, this Article claims that IPO firms adopt …
The Perpetual Corporation, Andrew A. Schwartz
The Perpetual Corporation, Andrew A. Schwartz
Publications
Courts and commentators take for granted that the ultimate objective of a business corporation is long-run profitability, not immediate profits. But a corporation is a creature of statute, so a statutory source for this rule must be found--or it is not really a rule. Yet prior literature has not identified any such legal basis, leaving a gap in corporate theory. This Article fills that gap by showing that the modern corporation is obliged to act with a long-term view because it has "perpetual existence" under the law. This Article then explains that because they must plan for a perpetual future, …
The Corporation As Insider Trader, Mark J. Loewenstein, William K.S. Wang
The Corporation As Insider Trader, Mark J. Loewenstein, William K.S. Wang
Publications
With regard to issuer purchases, some of the traditional policy rationales against insider trading do not apply or apply with less force. Nevertheless, courts, commentators, and the SEC have all stated or assumed that a public corporation violates rule 10b-5 by buying its own shares in the market based on material, nonpublic information. In rule 10b-5 cases involving face-to-face transactions, several circuit courts have ruled that the company may not purchase its own stock based on material information not known to the seller. No good reason exists not to apply these precedents to stock market trades by issuers, especially because …