677 research outputs found
Globalization
No full textThis chapter examines the impact of globalization on securities markets, exploring how cross-border capital flows, regulatory convergence, and international cooperation shape market structure and supervision. It provides a broad overview of the challenges and opportunities globalization presents for policymakers, investors, and regulators in the 21st century
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The Role of the Market Model in Corporate Law Analysis: A Comment on Weiss and White
No full textIn a recent article, Elliott Weiss and Lawrence J. White sought to establish that seven decisions of the Delaware courts concerning corporation law had little value in predicting the future conduct of courts and corporations under the Delaware Corporations Law. Weiss and White relied, in part, on a statistical analysis of changes in the prices of publicly traded shares in Delaware corporations to show that the seven studied decisions had no statistically significant market impact.
In this Comment, Professor Fox takes issue with the explanation Weiss and White give for their data. Although the absence of an observed market impact might demonstrate the insignificance of the judicial decisions, Fox argues, it more likely demonstrates the limited capacity of market studies to reveal changes in the actual value of shares of stock resulting from such decisions.
In Part I, Fox states and defends his assumption that judicial decisions do have predictive value regarding the future conduct of courts and corporate actors. In Part II, he examines the justifications offered for the conclusion that market study techniques provide reliable evidence that the seven decisions Weiss and White studied had no impact on share value. In Part III, he argues that the market model is not well equipped to discern the significance of events like judicial decisions. Finally, in Part IV, Professor Fox examines the significance of the results of the Weiss and White study for the current debate among corporate scholars concerning the contractual model of corporate law
The Role of the Market Model in Corporate Law Analysis: A Comment on Weiss and White
No full textIn a recent article, Elliott Weiss and Lawrence J. White sought to establish that seven decisions of the Delaware courts concerning corporation law had little value in predicting the future conduct of courts and corporations under the Delaware Corporations Law. Weiss and White relied, in part, on a statistical analysis of changes in the prices of publicly traded shares in Delaware corporations to show that the seven studied decisions had no statistically significant market impact.
In this Comment, Professor Fox takes issue with the explanation Weiss and White give for their data. Although the absence of an observed market impact might demonstrate the insignificance of the judicial decisions, Fox argues, it more likely demonstrates the limited capacity of market studies to reveal changes in the actual value of shares of stock resulting from such decisions.
In Part I, Fox states and defends his assumption that judicial decisions do have predictive value regarding the future conduct of courts and corporate actors. In Part II, he examines the justifications offered for the conclusion that market study techniques provide reliable evidence that the seven decisions Weiss and White studied had no impact on share value. In Part III, he argues that the market model is not well equipped to discern the significance of events like judicial decisions. Finally, in Part IV, Professor Fox examines the significance of the results of the Weiss and White study for the current debate among corporate scholars concerning the contractual model of corporate law
Required Disclosure and Corporate Governance
No full textLittle scholarly attention has been paid to the corporate governance effects of required disclosure. In analyzing these effects, Fox concludes that required disclosure can improve corporate governance in important ways
Corporate Governance Lessons from Transition Economy Reforms
No full textCorporate Governance Lessons from Transition Economy Reforms explores a timely topic at the intersection of economics, law, and policy reform. To date, most sophisticated theoretical work on corporate governance has focused on advanced market economies. In post-socialist countries, corporate finance and transition economics scholars have often done little more than convey the received theory to transition policymakers.
This volume focuses, for the first time, on the reverse concern: what, if anything, do the reform experiences of transition countries teach about corporate governance theory more generally? To investigate this question, Merritt Fox and Michael Heller have assembled a stellar group of corporate governance theorists. The answers are startling.
The principal essays approach the problem from three complementary perspectives that form the organizing themes of the book. The first part refines core corporate theory terms. The second presents important empirical work that explores the channels through which “good corporate governance” may link to the real economy. The final part links corporate governance theory to practical reforms. After fifteen years of experience, practice can now inform theory.
Together, these essays present a comprehensive new view on a provocative theme. Written in an accessible style, they will be of interest to a broad range of scholars, commentators, and policymakers.https://scholarship.law.columbia.edu/books/1116/thumbnail.jp
The New Stock Market: Law, Economics, and Policy
No full textThe U.S. stock market has been transformed over the last twenty-five years. Once a market in which human beings traded at human speeds, it is now an electronic market pervaded by algorithmic trading, conducted at speeds nearing that of light. High-frequency traders participate in a large portion of all transactions, and a significant minority of all trade occurs on alternative trading systems known as “dark pools.” These developments have been widely criticized, but there is no consensus on the best regulatory response to these dramatic changes.The New Stock Market offers a comprehensive new look at how these markets work, how they fail, and how they should be regulated. Merritt B. Fox, Lawrence R. Glosten, and Gabriel V. Rauterberg describe stock markets’ institutions and regulatory architecture. They draw on the informational paradigm of microstructure economics to highlight the crucial role of information asymmetries and adverse selection in explaining market behavior, while examining a wide variety of developments in market practices and participants. The result is a compelling account of the stock market’s regulatory framework, fundamental institutions, and economic dynamics, combined with an assessment of its various controversies. The New Stock Market covers a wide range of issues including the practices of high-frequency traders, insider trading, manipulation, short selling, broker-dealer practices, and trading venue fees and rebates. The book illuminates both the existing regulatory structure of our equity trading markets and how we can improve it.https://scholarship.law.columbia.edu/books/1002/thumbnail.jp
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The ::law, economics, and policy /
No full textThe U.S. stock market has been transformed over the last twenty-five years. Once a market in which human beings traded at human speeds, it is now an electronic market pervaded by algorithmic trading, conducted at speeds nearing that of light. High-frequency traders participate in a large portion of all transactions, and a significant minority of all trade occurs on alternative trading systems known as "dark pools." These developments have been widely criticized, but there is no consensus on the best regulatory response to these dramatic changes. The New Stock Market offers a comprehensive new look at how these markets work, how they fail, and how they should be regulated. Merritt B. Fox, Lawrence R. Glosten, and Gabriel V. Rauterberg describe stock markets' institutions and regulatory architecture. They draw on the informational paradigm of microstructure economics to highlight the crucial role of information asymmetries and adverse selection in explaining market behavior, while examining a wide variety of developments in market practices and participants. The result is a compelling account of the stock market's regulatory framework, fundamental institutions, and economic dynamics, combined with an assessment of its various controversies. The New Stock Market covers a wide range of issues including the practices of high-frequency traders, insider trading, manipulation, short selling, broker-dealer practices, and trading venue fees and rebates. The book illuminates both the existing regulatory structure of our equity trading markets and how we can improve it
Insider Trading Deterrence versus Managerial Incentives: A Unified Theory of Section 16(b)
No full textDebate over section 16(b) has generated more heat than light. Critics assert that it is totally ineffective in combating insider trading because all that an insider needs to do to avoid its bite is to wait six months before reversing the trade. Supporters of section 16(b) ignore this criticism and assert that anything but the broadest application of the statute will impede the war against insider trading. The theory developed here refines and focuses this debate. It shows that a penalty on short-swing trading, by prolonging the period of dediversification, does reduce trades based on inside information. It also shows that the penalty has costs: it reduces the attractiveness of management share ownership and share-price-based compensation and detracts from their effectiveness as methods of reducing agency costs.
The theory does not definitely answer the question whether section 16(b) should be retained. It does, however, point to the critical factors for making that determination: one's assessments of the harm, if any, that results from insider trading and of the extent to which lower levels of share ownership and share-price-based compensation increase agency costs. It also identifies the minimum characteristics necessary to justify inclusion of a class of paired transactions within section 16(b)'s reach if the statute is retained: the class must contain a larger portion of potential transactions motivated by inside information than officer-and-director transactions generally.
This rule of statutory reach is important. Whatever one's individual assessments of the factors cited above, section 16(b) is unlikely to be repealed in the foreseeable future. Public sentiment against insider trading is sufficiently strong that a proposal to eliminate the only provision in the Federal securities law that explicitly deals with such trading would meet overwhelming political opposition. Thus we must be sure that this rule of thumb is no cruder than it needs to be. A review of judicial and SEC decisionmaking shows there is significant room for improvement
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Insider Trading Deterrence Versus Managerial Incentives: A Unified Theory of Section 16(b)
No full textPart 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\u27 and directors\u27 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 reasons to believe that managerial share ownership and share-price based compensation are important to the proper functioning of our economy because of the significant incentives they provide for aligning the otherwise divergent interests of management and \u27shareholders. The weakening of these incentives is a social cost of including a given class of paired transactions within the reach of section 16(b ).
Part II develops a theory of how a penalty on short-swing trades works in the case of transactions clearly covered by the statute ordinary cash purchases and sales of securities. It utilizes portfolio theory - the mainstay of modem financial economics - to predict the effect of a short-swing penalty on the respective behaviors of insiders who are and who are not trading on inside information. The fact that transactions occur within six months of each other increases the likelihood that one of them is based on inside information - an increase that is significant over a wide range of plausible values for the relevant parameters. Imposing a penalty on short-swing transactions discourages trades based on inside information by forcing those who would engage in them to remain dediversified for six months and hence to be at greater financial risk than they would be without the statute. This theory of section 16(b )\u27s operation, it will be shown, suggests that purchase and sale should be defined in terms of when the increase in portfolio risk is assumed and when it ends. This theory suggests that the statute should only be concerned with the possibility of abuse at the time of the first transaction.
Part III employs the lessons of Parts I and II to solve the actual problems faced by the SEC and the courts in applying section 16(b) to cases other than pairs of ordinary cash-for-security transactions clearly covered by the statute. It begins by proposing an overall principle of statutory reach derived from the statute\u27s internal logic, from other evidence of congressional intent, ~md from a concern for economic efficiency: a given class of paired transactions should be included within the coverage of section 16(b) only if the potential officer-and-director transactions belonging to the class, because they are separated by less than six months, contain a larger portion of transactions motivated by inside information than do potential officer-and-director transactions generally. Guided by the theory developed in Part II, this overall principle of statutory reach is then applied to a number of hypothetical examples. This approach is compared with the approaches used by the courts and the SEC dealing with the same issues. As will be seen, the approach based on the theory developed in Part II suggests simple, clear, supportable solutions to a number of problems with which the courts and the SEC have struggled for decades
Private equity financing (Tape 3 of 3)
No full textPresented as the George A. Leet Business Symposium lecture from the 2000-01 Case Western Reserve University School of Law lecture series on November 10, 2000.
Introduction / Dean Gerald Korngold -- Opening remarks / Professor George Dent -- Public capital versus private capital / Joseph A. Grundfest -- Liability in private placement / Merrit B. Fox -- Trends in venture capital and their impact on lawyers / John C. Mcllwrait
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