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Frictions And Tax-Motivated Hedging: An Empirical Exploration Of Publicly-Traded Exchangeable Securities, William M. Gentry, David M. Schizer Jan 2003

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 "tax-free hedging," which offers economic benefits of a sale without triggering 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 5 percent decline in ...


The Attorney As Gatekeeper: An Agenda For The Sec, John C. Coffee Jr. Jan 2003

The Attorney As Gatekeeper: An Agenda For The Sec, John C. Coffee Jr.

Faculty Scholarship

Section 307 of the Sarbanes-Oxley Act authorizes the SEC to prescribe "minimum standards of professional conduct" for attorneys "appearing or practicing" before it. This brief statutory provision frames a much larger question: What is the role of the corporate attorney in securities transactions in the public markets? Is the attorney's role that of (a) an advocate, (b) a transaction cost engineer, or, more broadly, (c) a gatekeeper – that is, a reputational intermediary with some responsibility to monitor the accuracy of corporate disclosures? The bar has long divided over this question, with the bar associations resisting any such obligation. Yet ...


Gatekeeper Failure And Reform: The Challenge Of Fashioning Relevant Reforms, John C. Coffee Jr. Jan 2003

Gatekeeper Failure And Reform: The Challenge Of Fashioning Relevant Reforms, John C. Coffee Jr.

Faculty Scholarship

Securities markets have long employed "gatekeepers" – independent professions who pledge their reputational capital – to protect dispersed investors. This strategy of relying on reputational intermediaries to assess, verify and certify the corporate issuer's disclosures appears to have failed during the late 1990s, as accounting irregularities increased exponentially. Part I of this paper assesses the reasons for this failure, emphasizing both a shortfall in deterrence and the sudden shift from a cash-based to an equity-based system of executive compensation during the 1990s. Part II and III then survey the realistic regulatory options and the incomplete steps taken by the Sarbanes-Oxley Act ...


The Rise Of State Bankruptcy-Directed Legislation, Ronald J. Mann Jan 2003

The Rise Of State Bankruptcy-Directed Legislation, Ronald J. Mann

Faculty Scholarship

This is a paper for a conference at Cardozo Law School on the relation between securitization and secured credit. Concerns about securitization have been focused by decisions of various States to take the lead in attempting to decide how those issues will be resolved in bankruptcy proceedings. In this paper I step back from that debate to ask a more fundamental question: who is to decide the appropriate policy response to those issues? On the one hand, Congress could decide those questions in the exercise of its exclusive constitutional power to enact bankruptcy laws. Or, if it chose to do ...