Law Commons^™

Insider Trading Deterrence Versus Managerial Incentives: A Unified Theory Of Section 16(B), Merritt B. Fox

Faculty Scholarship

Part I of this article assesses the social costs of a crude rule of thumb. Because section 16(b) applies to a given class of paired transactions, it deters both transactions based on inside information and transactions not so based. Each time section 16(b) is stretched to include a class of paired transactions, it deters some additional innocent transactions. This side effect will take the form of officers' and directors' purchasing fewer shares in their own companies and refusing to accept as large a portion of their compensation in a form based on share price. There are strong theoretical and empirical …

Hail Britannia?: Institutional Investor Behavior Under Limited Regulation, John C. Coffee Jr., Bernard S. Black

Faculty Scholarship

A central puzzle in understanding the governance of large American public firms is why most institutional shareholders are passive. Why would they rather sell than fight? Until recently, the Berle-Means paradigm – the belief that separation of ownership and control naturally characterizes the modern corporation – reigned supreme. Shareholder passivity was seen as an inevitable result of the scale of modern industrial enterprise and of the collective action problems that face shareholders, each of whom owns only a small fraction of a large firm's shares.

A paradigm shift may be in the making, however. Rival hypotheses have recently been offered …