Law and Economics Commons^™

The Incentive Problems With The All-Or-Nothing Crowdfunding Model, Garry A. Gabison

Garry A. Gabison

This paper discusses how the all-or-nothing model can dis-incentivize crowd investors to perform due diligence over the fraud or failure risks of crowdfunding campaign. Specifically, the major upside of this model is that a project cannot be funded without a critical mass investing. If enough individual in this critical mass of crowd investors perform its due diligence to check whether projects will become successful then the model function; instead, this paper argues that this model incentivizes the crowd to produce noisy information that cannot be relied. In the all-or-nothing model, sequential investments encourages rational investors not perform due diligence because …

Democratizing Startups, Seth C. Oranburg

Seth C Oranburg

The Jumpstart Our Business Startups Act of 2012 intends to “help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.” The goal is to “democratize startups” by making capital available to diverse entrepreneurs in new geographies. Yet the net effect of securities regulations and market conditions is the opposite. Startup companies are encouraged to stay private so capital is consolidating in large, mature firms instead of recycling into new startups. Evidence of consolidation is that once-rare “Unicorns” (billion-dollar startups) now number over 111. More money is going into huge …

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

The Law And Ethics Of High-Frequency Trading, Steven R. Mcnamara

Steven R. McNamara

Michael Lewis’s recent book Flash Boys has resurrected the controversy concerning “high-frequency trading” (HFT) in the stock markets. While HFT has been important in the stock markets for about a decade, and may have already peaked in terms of its economic significance, it touched a nerve with a public suspicious of financial institutions in the wake of the financial crisis of 2008-2009. In reality, HFT is not one thing, but a wide array of practices conducted by technologically adept electronic traders. Some of these practices are benign, and some even bring benefits such as liquidity and improved price discovery to …

Optimized Theft: Why Some Controlling Shareholders “Generously” Expropriate From Minority Shareholders, Sang Yop Kang

Sang Yop Kang

Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in a bad-law jurisdiction is: why some controlling shareholders (“roving controllers”) loot the entire corporate assets at once, and why others (“stationary controllers”) siphon a part of corporate assets on a continuous basis. To solve this conundrum, this Article provides analytical frameworks exploring the behaviors and motivations of controlling shareholders. To begin with, I reinterpret Olson’s political theory of “banditry” in the context of corporate governance in developing countries. Based on a new taxonomy of controlling shareholders (“roving controllers” …

Insider Trading And Evolutionary Psychology: Strong Reciprocity, Cheater Detection, And The Expanding Boundaries Of The Law, Steven R. Mcnamara

Steven R. McNamara

Insider trading law has expanded in recent years to cover instances of trading on non-public information that fall outside of the fiduciary duty framework set forth in the landmark cases of Chiarella and Dirks. The trend towards a broader insider trading law moves the law closer towards what evolutionary psychology tells us humans desire when engaging in collective action: that individuals benefit in proportion to the effort or investment they make in a common enterprise. Insider trading law can therefore be understood as a societal response to cheating in group activities, and the recent expansion of the law as …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Since 1978, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. The NACD has grown from a mere realization of the importance of corporate governance to become the only national membership organization created by and for corporate directors. …

The New Leadership Paradigm In Today’S Financial System: Foreign And Domestic Banking, Valencia Tamir Johnson Dr

Valencia T Johnson

This article discusses the important of new leadership paradigm in today’s financial system and the importance the growth of foreign banking and investment in the United States and abroad. The article provides approaches that would inspire and develop effective leadership within financial organizations (foreign and domestic banking activities among investments, competitiveness, and improving the financial industry).

Virtual Currencies: Bitcoin & What Now After Liberty Reserve, Silk Road, And Mt. Gox?, Lawrence J. Trautman

Lawrence J. Trautman Sr.

During 2013, the U.S. Treasury Department evoked the first use of the 2001 Patriot Act to exclude virtual currency provider Liberty Reserve from the U.S. financial system. This article will discuss: the regulation of virtual currencies; cybercrimes and payment systems; darknets, Tor and the “deep web;” Bitcoin; Liberty Reserve; Silk Road and Mt. Gox. Virtual currencies have quickly become a reality, gaining significant traction in a very short period of time, and are evolving rapidly. Virtual currencies present particularly difficult law enforcement challenges because of their: ability to transcend national borders in the fraction of a second; unique jurisdictional issues; …

Prudential Regulation And The Knowledge Problem: Towards A New Paradigm Of Systemic Risk Regulation, Michael T. Cappucci

Michael T Cappucci

In this article I examine the regulatory structure created by Title I of the Dodd-Frank Act and ask whether the prudential regulatory authority given to the Financial Stability Oversight Council is an effective tool for accomplishing the mission of identifying and containing risk in the financial system. Prudential regulation, the principal tool at the disposal of the FSOC, was developed in the 19th century to counteract moral hazard in the banking system. Over time, prudential supervision has become policymakers’ regulation of choice, to the point where it is now employed in the oversight and regulation of non-bank financial firms. However, …

Controlling Shareholders: Benevolent “King” Or Ruthless “Pirate”, Sang Yop Kang

Sang Yop Kang

Unfair self-dealing and expropriation of minority shareholders by a controlling shareholder are common business practices in developing countries (“bad-law countries”). Although controlling shareholder agency problems have been well studied so far, there are many questions unanswered in relation to behaviors and motivations of controlling shareholders. For example, a puzzle is that some controlling shareholders in bad-law countries voluntarily extract minority shareholders less than other controlling shareholders. Applying Mancur Olson’s framework of political theory of “banditry” to the context of corporate governance, this Article proposes that there are at least two categories of controlling shareholders. “Roving controllers” are dominant shareholders with …

Law, Bubbles, And Financial Regulation, Erik F. Gerding

Erik F. Gerding

This introductory chapter of the book "Law, Bubbles, and Financial Regulation" outlines how financial regulation can fail when it is needed the most. The dynamics of asset price bubbles weaken financial regulation just as financial markets begin to overheat and the risk of crisis spikes. At the same time, the failure of financial regulations adds further fuel to a bubble.

This book examines the interaction of bubbles and financial regulation through over three centuries of history of financial crises. This perspective reveals that law is crucial to the story of bubbles and that the legal history of the current global …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

Las Medianas Empresas: Aproposito Del Reglamento Alternativo De Valores, John Pineda Galarza

John Pineda Galarza

Las medianas empresas como parte de su crecimiento necesitan alternativas de financiamiento que se adecuen a su realidad. Es así que el financiamiento bursátil, a través de la emisión de Instrumentos de Corto Plazo (ICP) es una alternativa. No obstante, existen costos asociados que encarecen la primera emisión haciéndola más cara que el financiamiento tradicional (bancario) pues el emisor deberá incurrir en costos de naturaleza única antes de colocar los ICP, que se traducen en 3 o 4 puntos adicionales sobre la tasa de colocación. El problema es que, en el Perú, la alternativa de financiamiento a través de la …

The Economics And Regulation Of Network Branded Prepaid Cards, Todd J. Zywicki

Todd J. Zywicki

General-purpose reloadable prepaid cards have been one of the fastest-growing sectors of the consumer payments marketplace in recent years. Their importance has accelerated as a consequence of new regulations enacted in the wake of the 2008 financial crisis. This increased use of prepaid cards has also increased angst among regulators, especially regarding the number and size of fees on prepaid cards. State and federal regulators as well as Congress are interested in imposing new regulations on prepaid cards. These calls for regulation, however, have proceeded in a largely fact-free environment. This paper describes the current economic and regulatory landscape for …

Presentación "El Procedimiento Administrativo", Norma E. Pimentel

Norma E Pimentel

Presentación al módulo 2

Arbitration, Women Arbitrators And Sharia, Mohamed Raffa Dr.

Mohamed Raffa Dr.

So, can the Arbitrator be a woman? Omar, the third Khalipha in Islam after Prophet Muhammad, actually appointed a female judge. Today, across the various Muslim countries, there are female judges in almost every Muslim country except in Saudi Arabia. There are about 70 female Iraqi judges, 10 female judges in the UAE, 20 in Egypt female judges and Arbitrators, Nigeria recently appointed the first female Chief Justice in Africa as well as it has one of the largest National Associations of Women Judges; with more in other Muslim Countries including Indonesia and Malaysia.

Dodd-Frank Act And Remittances To Post-Conflict Countries: The Law Of Unintended Consequences Strikes Again, Raymond Natter

Raymond Natter

The Dodd-Frank Act established a new Federal framework for the regulation of international remittance payments that originate in the U.S. However, the statute and implementing regulations may have the unintended consequence of disrupting the flow of remittance funds to post-conflict nations.

Neoliberalism And The Law: How Historical Materialism Can Illuminate Recent Governmental And Judicial Decision Making, Justin Schwartz

Justin Schwartz

Neoliberalism can be understood as the deregulation of the economy from political control by deliberate action or inaction of the state. As such it is both constituted by the law and deeply affects it. I show how the methods of historical materialism can illuminate this phenomenon in all three branches of the the U.S. government. Considering the example the global financial crisis of 2007-08 that began with the housing bubble developing from trade in unregulated and overvalued mortgage backed securities, I show how the repeal of the Glass-Steagall Act, which established a firewall between commercial and investment banking, allowed this …

Rise Of The Intercontinentalexchange And Implications Of Its Merger With Nyse Euronext, Latoya C. Brown

Latoya C. Brown, Esq.

This paper examines the impending merger between the IntercontinentalExchange (ICE) and NYSE Euronext against the backdrop of the current structure of the global financial services industry. The paper concludes that the merger embodies what the financial services industry is becoming and captures the model that will allow exchanges to remain competitive in today’s marketplace: mega-exchanges with broader asset classes and electronic platforms. As technology and globalization threaten their vitality, exchanges will need to continue reinventing and adapting. Increasingly over the last decade they have done so by merging and by moving, at least a part of, their operations on screen. …

The Regulation Of U.S. Money Market Funds: Lessons From Europe, Latoya C. Brown

Latoya C. Brown, Esq.

The recent financial crisis challenged long held perceptions of money market funds (“MMFs”) as stable and highly liquid instruments. Regulators in the US and in Europe now seek to impose additional rules on MMFs to avoid another significant failure as happened to the Reserve Fund. In the US, the debate is drawing even more media attention as question of which regulatory body - such as the Securities and Exchange Commission, the Treasury Department, and the Financial Stability Oversight Council – should lead the way has taken interesting twists and turns. This paper examines primary reform options being proposed in the …

What Effect Does Financial Law Have On The Wealth Management Industry (And Wealth) In Emerging Markets?, Bryane Michael

Bryane Michael (bryane.michael@stcatz.ox.ac.uk)

What effect does financial law have on wirehouses' ability to gather customers and their assets in emerging markets? In this presentation, I look at the data showing the primal importance of law in explaining wealth managers' ability to gather assets. I present a synthesis of some of the research on legislative/regulatory change and the growth of the wealth management industry.

Toward A Legal Theory Of Finance, Katharina Pistor

Katharina Pistor

This paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put them in direct tension with commitments enshrined in law or contracts. This is the case especially in times of financial crises when the full enforcement of legal commitments would result in the self-destruction of the financial system. This law-finance paradox tends to be resolved by suspending the full force of law where the survival …

Transparencia Y Anticorrupción, Primera Llamada De Peña, Norma E. Pimentel

Norma E Pimentel

No abstract provided.

Towards A New Transition Economics, Katharina Pistor

Katharina Pistor

In these brief comments I take issue with the thesis expressed in Konstantin Sonin’s conference review that economic transition is a thing of the past. To the contrary, I argue that it has only just begun and so has the process of rethinking the economic theories and models that have framed the subfield of transition economics. Specifically, I point out that the many surprises economists have encountered when confronted with the actual results of the transition process reveal deeper flaws in the analytical framework that informs their analyses and policy prescriptions. If protecting theories and models is of first order …

El Derecho Al Trato Justo, A La Equidad Y A La Educación Financiera De Los Consumidores, Jose R. Nina Cuentas

Jose R. Nina Cuentas

Tema de Protección del Usuario Financiero en la Contratación de Créditos de Consumo.

On The Theoretical Foundations For Regulating Financial Markets, Katharina Pistor

Katharina Pistor

How we think about financial markets determines how we regulate them. Since the 1970s modern finance theory has shaped how we think about and regulate financial markets. It is based on the notion that markets are or can be made (more) efficient. Financial markets have been deregulated when they were thought to achieve efficient outcomes on their own; and regulation was designed to lend crutches to them when it appeared that they needed support. While modern finance theory has suffered some setbacks in the aftermath of the global crisis, defenders hold that improving market efficiency should still be the overriding …

Running In The Shadows, Joshua A. Craven

joshua a craven

The financial crisis of 2007-2008 can be characterized as a run on the shadow banking system. Over several decades, the United States slowly and quietly developed a massive shadow banking system—a complex chain of borrowers and investors entering into repo agreements financed by money-market mutual funds and primary dealers, collateralized with asset-backed securities derived from mortgages originated by lenders and securitized through special purpose vehicles, then purchased by banks with capital raised by entering into repo agreements. For years, this chain of transactions operated to meet banks’ short-term liquidity needs, until uncertainty in the value of the asset-backed securities used …

El Rostro Público De La Propaganda Administrativa, Norma E. Pimentel

Norma E Pimentel

No abstract provided.

Cuando La Educación Sea Diferente, Norma E. Pimentel

Norma E Pimentel

No abstract provided.