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University of Michigan Law School

Law & Economics Working Papers

Securities Law

2010

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Full-Text Articles in Law

Are Investors’ Gains And Losses From Securities Fraud Equal Over Time? Theory And Evidence, Alicia J. Davis Oct 2010

Are Investors’ Gains And Losses From Securities Fraud Equal Over Time? Theory And Evidence, Alicia J. Davis

Law & Economics Working Papers

Most leading securities regulation scholars argue that compensating securities fraud victims is inefficient. They maintain that because diversified investors that trade frequently are as likely to gain from trading in fraud-tainted stocks as they are to suffer harm from doing so, these investors should have no expected net losses from fraud over the long term. This assertion, which analogizes trading in fraud-tainted stocks to participating in a coin toss game in which players win $1 on heads and lose $1 on tails, is problematic for a number of reasons. First, even if we accept this analogy, probability theory holds that …


Securities Law In The Roberts Court: Agenda Or Indifference?, Adam C. Pritchard Oct 2010

Securities Law In The Roberts Court: Agenda Or Indifference?, Adam C. Pritchard

Law & Economics Working Papers

Historically, securities law has not been a high priority for the Supreme Court. The first five years of the Roberts Court, however, suggest an upsurge of interest in the federal securities laws, with nine cases decided, a significant increase from the Rehnquist Court’s average. These numbers are deceptive. Analysis of the opinions deciding these cases – and more importantly, the issues debated by the justices – suggests that the Court is not interested in the substance of the securities laws or the policies that animate them. Instead, securities law serves as a backdrop for debates over statutory interpretation and the …


The Price Of Pay To Play In Securities Class Actions, Stephen Choi, Drew T. Johnson-Skinner, Adam C. Pritchard Aug 2010

The Price Of Pay To Play In Securities Class Actions, Stephen Choi, Drew T. Johnson-Skinner, Adam C. Pritchard

Law & Economics Working Papers

This paper studies the effect of campaign contributions to lead plaintiffs — “pay to play’’ — on the level of attorneys’ fees in securities class actions. We find that state pension funds generally pay lower attorneys’ fees when they serve as lead plaintiffs in securities class actions than do individual investors serving in that capacity. This differential disappears, however, when we control for campaign contributions made to officials with influence over state pension funds. Thus, pay to play appears to increase agency costs borne by shareholders in securities class actions.