Law and Economics Commons^™

The Regulatory Accountability Act Loses Steam But The Trump Executive Order On Alj Selection Upturned 71 Years Of Practice, Jeffrey Lubbers

Scholarly Articles in Law Reviews & Journals

No abstract provided.

Beyond Bitcoin: Leveraging Blockchain To Benefit Business And Society, Rachel Epstein, Marcia Narine Weldon

Articles

No abstract provided.

Being True To Trulia: Do Disclosure-Only Settlements In Merger Objection Lawsuits Harm Shareholders?, Eric L. Talley, Giuseppe Dari‐Mattiacci

Faculty Scholarship

A significant debate within mergers and acquisitions law concerns the explosive popularity of the “merger objection lawsuit” (MOL), a shareholder action seeking to enjoin an announced deal on fiduciary duty grounds. MOLs blossomed during the Financial Crisis, becoming popularly associated with “shareholder shakedowns,” whereby quick-triggered plaintiff attorneys would file against – and then rapidly settle with – acquirers, typically on non-monetary terms containing modest added disclosures in exchange for blanket class releases and attorney fee awards. This practice unleashed a torrent of criticism from lawyers, commentators, academics, and (ultimately) judges, culminating in a doctrinal shift in Delaware law in the …

Bitcoin, Virtual Currencies, And The Struggle Of Law And Regulation To Keep Pace

Marquette Law Review

At less than a decade old, Bitcoin and other virtual currencies have had a major societal impact, and proven to be a unique payment systems challenge for law enforcement, financial regulatory authorities worldwide, and the investment community. Rapid introduction and diffusion of technological changes throughout society, such as the blockchain that serves as Bitcoin’s crypto-foundation, continue to exceed the ability of law and regulation to keep pace. During 2017 alone, the market price of Bitcoin rose 1,735%, from about $970 to $14,292, causing an investor feeding frenzy. As of September 11, 2018, a total of 1,935 cryptocurrencies are reported, having …

Mandatory Disclosure In Primary Markets, Andrew A. Schwartz

Publications

Mandatory disclosure—the idea that companies must be legally required to disclose certain, specified information to public investors—is the first principle of modern securities law. Despite the high costs it imposes, mandatory disclosure has been well defended by legal scholars on two theoretical grounds: ‘Agency costs’ and ‘information underproduction.’ While these two concepts are a good fit for secondary markets (where investors trade securities with one another), this Article shows that they are largely irrelevant in the context of primary markets (where companies offer securities directly to investors). The surprising result is that primary offerings—such as an IPO—may not require mandatory …

Money That Costs Too Much: Regulating Financial Incentives, Kristen Underhill

Faculty Scholarship

Money may not corrupt. But should we worry if it corrodes? Legal scholars in a range of fields have expressed concern about “motivational crowding-out,” a process by which offering financial rewards for good behavior may undermine laudable social motivations, like professionalism or civic duty. Disquiet about the motivational impacts of incentives has now extended to health law, employment law, tax, torts, contracts, criminal law, property, and beyond. In some cases, the fear of crowding-out has inspired concrete opposition to innovative policies that marshal incentives to change individual behavior. But to date, our fears about crowding-out have been unfocused and amorphous; …

Price And Prejudice: An Empirical Test Of Financial Incentives, Altruism, And Racial Bias, Kristen Underhill

Faculty Scholarship

Many argue that paying people for good behavior can crowd out beneficial motivations like altruism. But little is known about how financial incentives interact with harmful motivations like racial bias. Two randomized vignette studies test how financial incentives affect bias. The first experiment varies the race of a hypothetical patient in need of a kidney transplant (black or white), an incentive ($18,500 or none), and addition of a message appealing to altruism. Incentives encouraged donation but introduced a significant bias favoring white patients. The second experiment assesses willingness to donate to a patient (black or white) without an incentive and …

The Core Corporate Governance Puzzle: Contextualizing The Link To Performance, Merritt B. Fox, Ronald J. Gilson, Darius Palia

Faculty Scholarship

There is a puzzle at the core of corporate governance theory. Prior scholarship reports a strong relationship between firms best at creating shareholder value and those rated highly by the established corporate governance indices. Little work explores why, however. We hypothesize that the link between governance and performance depends centrally on context. We illustrate the importance of context by exploring circumstances when a firm's governance structure can operate as a signal of the quality of its management. The idea is that better managers are on average more likely to choose a highly rated governance structure than are bad managers because …

Why Do Auditors Fail? What Might Work? What Won't?, John C. Coffee Jr.

Faculty Scholarship

Auditing failures and scandals have become commonplace. In response, reformers (including the Kingman Review in the U.K. and a recent report of the U.K.’s Competition and Market Authority) have proposed a variety of remedies, including prophylactic bans on auditors providing consulting services to their clients in the belief that this will minimize the conflicts of interest that produce auditing failures. Although useful, such reforms are already in place to a considerable degree and may have reached the point of diminishing returns. Moreover, this strategy does not address the deeper problem that clients (or their managements) may not want aggressive auditing, …

Multilateral Development Banks, Their Member States And Public Accountability: A Proposal, Daniel D. Bradlow

Scholarly Articles in Law Reviews & Journals

More than 25 years ago the multilateral development banks (MDBs) began establishing independent accountability mechanisms (IAMs), such as the World Bank’s Inspection Panel, to address concerns about MDB accountability to those communities and groups who were harmed by their decisions and actions. This essay argues that these mechanisms need updating. In the interests of promoting new and creative thinking about these mechanisms, it makes an ambitious two-part proposal designed to improve the efficacy of the IAMs, while also respecting the sovereignty of their member states and protecting an appropriate level of immunity for the MDBs. First, the MDBs should jointly …

Why Central Banks Need To Take Human Rights More Seriously, Daniel D. Bradlow

Scholarly Articles in Law Reviews & Journals

Most central bankers think that there is a tenuous connection between the operations of central banks and human rights. Their responsibility is to concentrate on the relatively narrow set of macro-economic variables that are relevant to their mandates and to leave to their country’s political leadership the decisions dealing with the complex and politically sensitive variables that affect the functioning of the economy and society.

This position is no longer tenable. Climate change is forcing the central banking community to rethink their view of their responsibilities. The recent release of the Network for Greening, the Financial System’s first comprehensive report …

Public Or Private Venture Capital?, Darian M. Ibrahim

Popular Media

No abstract provided.

A Bit Like Cash: Understanding Cash-For-Bitcoin Transactions Through Individual Vendors, Stephanie J. Robberson, Mark R. Mccoy

Journal of Digital Forensics, Security and Law

As technology improves and economies become more globalized, the concept of currency has evolved. Bitcoin, a cryptographic digital currency, has been embraced as a secure and convenient type of money. Due to its security and privacy for the user, Bitcoin is a good tool for conducting criminal trades. The Financial Crimes Enforcement Network (FinCEN) has regulations in place to make identification information of Bitcoin purchasers accessible to law enforcement, but enforcing these rules with cash-for-Bitcoin traders is difficult. This study surveyed cash-for-Bitcoin vendors in Oklahoma, Texas, Arkansas, Missouri, Kansas, Colorado, and New Mexico to determine personal demographic information, knowledge of …

Responsible Investing: Access Denied, Keith Macmaster

LLM Theses

Retail investors are increasingly demanding responsible investments. Retail investors also require the services of an advisor. Many responsible funds may not be responsible. This is due to many factors, including incomplete disclosures, and lack of financialization of risks. The thesis shows that traditional mutual funds, while structurally able to provide responsible investments, have not provided responsible holdings to mass affluent clientele. Institutional investors, and wealthy retail investors, have options to avail themselves of responsible investments; mass affluent investors have less choice to invest responsibly. The thesis recommends enhanced material disclosures and financial valuation models to better identify responsible investments. Advisors …

Backstop, Not Bailout: The Case For Preserving The Orderly Liquidation Authority Under Dodd-Frank, Mark R. Maciuch

Brooklyn Journal of Corporate, Financial & Commercial Law

The Trump Administration and Republicans have initiated efforts to repeal certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), one of which is the Orderly Liquidation Authority (OLA) under Title II of Dodd-Frank. Critics of the OLA argue that it enables, rather than prevents, future bailouts funded by taxpayers. These critics are concerned with the Federal Deposit Insurance Corporation’s (FDIC) discretion to decide when and how to resolve distressed financial firms, as well as the FDIC’s access to large amounts of funds from the U.S. Department of the Treasury to carry out these functions. Proponents of …

Insider Trading: Are Insolvent Firms Different?, Andrew Verstein

Brooklyn Journal of Corporate, Financial & Commercial Law

Federal law restricts insider trading. Yet these restrictions operate differently on insolvent or bankrupt firms. The law is more constraining in some respects: federal law extensively regulates the trading of residual claims in solvent firms but not insolvent firms. However, the law is more constraining in other respects: insider trading law does little to limit debt-trading at solvent firms, but a bankruptcy enmeshes all creditors in a web of insider trading rules. This Article identifies insolvency’s economic and legal influence on insider trading law and then normatively evaluates this transformation.

Cryptocurrencies: The New Species, Ors Penzes

Nova Law Review

No abstract provided.

Is High-Finance An Extractive Sector?, Saskia Sassen

Indiana Journal of Global Legal Studies

The article examines some of the key features of high finance (henceforth, simply finance) from the angle of the mix of capabilities that constitute the sector. It has a radically different organizing logic from that of, for instance, the typical mass consumer-oriented corporation. The article posits that finance has de-bordered the narrowly defined notion of finance as simply "financial firms and markets." It emphasizes its capacity to financialize a growing range of material and non-material elements. This has also meant that the sector by now encompasses a very broad range of financial and nonfinancial institutions, different types of jurisdictions, a …

Proxy Access Voting: Evaluating Proxy Access And The Recent Phenomenon Of Corporations Adopting Shareholder Protective Policies, Danielle Vukovich

San Diego International Law Journal

Shareholders hold a financial stake in a corporation, and therefore are often viewed as owners of the corporation and believed to be in control for all corporate actions. However, their powers are circumscribed. Board of directors committees nominate directors to serve the corporation and these directors have the power to select the corporation’s officers. The committees provide shareholders a slate of proposed directors that are voted on and approved at the annual shareholder meeting. Shareholders may also propose their own slate of directors, but this typically requires a proxy contest, which can be expensive due to the costs both associated …

Whistleblowers—A Case Study In The Regulatory Cycle For Financial Services, Ronald H. Filler, Jerry W. Markham

Brooklyn Journal of Corporate, Financial & Commercial Law

The Securities and Exchange Commission and the Commodity Futures Trading Commission were directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) to create whistleblower protection programs that reward informants with massive bounty payments. At the time of its passage, the Dodd-Frank Act was a highly controversial statute that was passed on partisan lines. Its whistleblowing authority was one of its “most contentious provisions.” As the result of the 2016 elections, the Dodd-Frank Act has come under renewed attack in Congress and by the new Trump administration. The stage is being set for possible repeal of …

Financing Green: Reforming Green Bond Regulation In The United States, Echo Kaixi Wang

Brooklyn Journal of Corporate, Financial & Commercial Law

In recent years, green bonds have emerged as a way for the financial industry to contribute to environmentally friendly projects, combat climate change, and provide funds for green infrastructures across the world. While the green bond market has expanded drastically across large nations in Europe and Asia, market growth has stalled in the United States, in part due to a lack of promising regulations in the United States. Existing regulations on green bond issuance in the United States only exists in the form of non-binding international guidelines. This Note reviews the benefits and potentials of green bonds both as an …

Uncharted Waters? Legal Ethics And The Benefit Corporation, Joseph Pileri

St. Mary's Journal on Legal Malpractice & Ethics

Corporate law norms are reflected in lawyers’ ethical duties. The enactment of benefit corporation legislation across the country signals a legislative acknowledgment that corporate law can serve as a public, rather than a merely private, ordering mechanism. Benefit corporations expressly adopt a public benefit as a legal purpose of the enterprise. While many have written about this important development with respect to corporate fiduciary law, this essay is the first to explore the professional and ethical responsibility of lawyers representing benefit corporations. In the last century, as scholars and courts drove an understanding of corporate law that elevated the interests …

Integrating Micro And Macro Policy Levers In Response To Financial Crises, Daniel A. Crane, Markus Kitzmuller, Graciela Miralles

Michigan Business & Entrepreneurial Law Review

The 2008–09 Global Financial Crisis originated from a poor incentive structure in the asset market derived from subprime mortgages. The ultimate bursting and unwinding of an asset bubble (here highly overvalued real estate prices woven into a complex multilayer network of securitization, so called collateralized debt obligations or CDOs) put enormous stress on the financial system, spreading through the global network economy and ultimately resulting in the worst economic crisis since the Great Depression. Economists today agree that the severe economic fallout can be largely attributed to the poor systemic performance of international financial markets. Global macroeconomic imbalances, as well …

Tax Compliance In A Decentralizing Economy, Manoj Viswanathan

Georgia State University Law Review

Tax compliance in the United States has long relied on information from centralized intermediaries—the financial institutions,employers, and brokers that help ensure income is reported and taxes are paid. Yet while the IRS remains tied to these centralized entities,consumers and businesses are not. New technologies, such as sharing economy platforms (companies such as Airbnb, Uber, and Instacart)and the blockchain (the platform on which various cryptocurrencies are based) are providing new, decentralized options for exchanging goods and services.

Without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance. Until now, legal …

Individual Accountability For Corporate Crime, Gregory Gilchrist

Georgia State University Law Review

Corporate crime is too often addressed by fining the corporation, leaving the real people who committed the crime facing no consequence at all. This failure to hold individuals accountable in cases of corporate malfeasance generates an accountability gap that undermines deterrence and introduces expressive costs. Facing heightened criticism of this trend, then-Deputy Attorney General Sally Yates issued a policy designed to generate prosecutions of real people in cases of corporate wrongdoing. The policy reflects a strong and continuing demand for more prosecutions of individuals in the corporate context.

This Article contends that the effort to introduce accountability by increasing prosecutions …

Federalism Of Personal Finance: State & Federal Retirement Plans, William Birdthistle

All Faculty Scholarship

In this Article, I consider possible approaches that attempt to improve the plans through which millions of Americans tend to their life savings. I begin by considering the inadequacies of our current system of defined contribution accounts and then address two possible alternatives: the first being a federal account universally available to Americans based largely on the model of the Thrift Savings Plan; the second being a system of statebased retirement accounts like those that have already been developed in a handful of states. Though I conclude that a single, federal plan would be superior, either alternative approach would be …

Bank Of America V. City Of Miami: Standing And Causation Under The Fair Housing Act, Alan M. White

Loyola of Los Angeles Law Review

No abstract provided.

Informed Trading And Its Regulation, Merritt B. Fox, Lawrence R. Glosten, Gabriel Rauterberg

Faculty Scholarship

Informed trading – trading on information not yet reflected in a stock’s price – drives the stock market. Such informational advantages can arise from astute analysis of varied pieces of public news, from just released public information, or from confidential information from inside a firm. We argue that these disparate types of trading are all better regulated as part of the broader phenomenon of informed trading. Informed trading makes share prices more accurate, enhancing the allocation of capital, but also makes markets less liquid, which is costly to the efficiency of trade. Informed trading thus poses a fundamental trade-off in …

How Investors Can (And Can't) Create Social Value, Paul Brest, Ronald J. Gilson, Mark A. Wolfson

Faculty Scholarship

Most investors throughout the world have a single goal: to earn the highest risk- adjusted financial returns. They would not accept a lower financial return from an investment that also produced social benefits.

More recently, an increasing number of socially-motivated investors have goals beyond maximizing returns. They also seek to align their investments with their social values (value alignment), and some also seek to cause the companies in which they invest to create more social value as a result of their investment (social value creation). We show in this essay that while it is relatively easy to achieve value alignment, …

The Origins Of A Capital Market Union In The United States, Jeffrey N. Gordon, Kathryn Judge

Faculty Scholarship

EU policy-makers have focused on the creation of a “Capital Market Union” to advance the economic vitality of the EU in the aftermath of the Global Financial Crisis of 2007-09 and the Eurozone crisis of 2011-13. The hope is that EU-wide capital markets will help remedy the limitations in the EU’s pattern of bank-centered finance, which, despite the launch of the Banking Union, remains tied to Member States. Capital market development will provide alternative channels for finance, which will facilitate greater resiliency, more economic integration within the EU, and more choices for savers and firms. This chapter uses the origins …