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Law & Economics Working Papers

Securities Law

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Scandal Enforcement At The Sec: The Arc Of The Option Backdating Investigations, Stephen Choi, Adam C. Pritchard, Anat C. Wiechman Jan 2013

Scandal Enforcement At The Sec: The Arc Of The Option Backdating Investigations, Stephen Choi, Adam C. Pritchard, Anat C. Wiechman

Law & Economics Working Papers

We study the SEC’s allocation of enforcement resources in the wake of a salient public scandal. We focus on the SEC’s investigations of option backdating in the wake of numerous media articles on the practice of backdating. We find that the SEC shifted its mix of investigations significantly toward backdating investigations and away from investigations involving other accounting issues. We test the hypothesis that SEC pursued more marginal investigations into backdating at the expense of pursuing more egregious accounting issues. Our event study of stock market reactions to the initial disclosure of backdating investigations shows that those reactions declined over …


Toward Transatlantic Convergence In Financial Regulation, Hwa-Jin Kim May 2011

Toward Transatlantic Convergence In Financial Regulation, Hwa-Jin Kim

Law & Economics Working Papers

This Article reviews the historical background of the Glass-Steagall Act of 1933 along with the developments in the markets that led to the Gramm-Leach-Bliley Act of 1999. It analyzes the discussions on the Volcker Rule in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 from a comparative perspective. It shows how the reform in the United States may impact financial institutions and markets in other jurisdictions. Germany and Switzerland, where universal banking is the hallmark of the financial services industry, are the primary jurisdictions of interest. After taking a historical and political look at the regulation of …


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.