We analyze a single-period game of incomplete information between a business owner and a bank to study the relationship between operational investment and capital structure in the context of asset-based lending (ABL). The bank moves first and offers a menu of loans to maximize its expected profit. Each loan offer is characterized by an interest rate and an inventory advance rate, which gives a credit limit that is increasing in the firm’s inventory investment. The owner then decides the inventory level and the mix of debt and equity with which to finance her firm’s operations. Our paper results in several new insights into the optimal solution for the firm, the characteristics of the menu of loan terms offered by the bank, and the sensitivity of the loan terms and equilibrium outcomes with respect to the operational characteristics of the firm. For instance, a leveraged firm stocks more inventory regardless of the interest rate or credit limit. These insights can be tested with data in future research.
{"title":"Operational Investment and Capital Structure Under Asset-Based Lending","authors":"Yasin Alan, V. Gaur","doi":"10.2139/ssrn.1716925","DOIUrl":"https://doi.org/10.2139/ssrn.1716925","url":null,"abstract":"We analyze a single-period game of incomplete information between a business owner and a bank to study the relationship between operational investment and capital structure in the context of asset-based lending (ABL). The bank moves first and offers a menu of loans to maximize its expected profit. Each loan offer is characterized by an interest rate and an inventory advance rate, which gives a credit limit that is increasing in the firm’s inventory investment. The owner then decides the inventory level and the mix of debt and equity with which to finance her firm’s operations. Our paper results in several new insights into the optimal solution for the firm, the characteristics of the menu of loan terms offered by the bank, and the sensitivity of the loan terms and equilibrium outcomes with respect to the operational characteristics of the firm. For instance, a leveraged firm stocks more inventory regardless of the interest rate or credit limit. These insights can be tested with data in future research.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"33 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89461247","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Over the past decades, the empirical evidence on the intersection of family businesses and corporate governance has flourished significantly in the context of developed economies. Yet, little is known to date about the effectiveness of various governance mechanisms in family-owned enterprises operating in emerging markets. Due to the evolving nature of corporate governance frameworks in these markets, family business practitioners need to enhance their knowledge about governance arrangements that may lead to superior performance outcomes. Our aim is to contribute to the literature and assist practitioners by exploring the relationship between family business identity and corporate governance attributes in family-run companies located in the UAE. Data related to organizational background, familial identification and governance devices were gathered from secondary sources for a sample of 195 UAE-based family firms. Based on quantitative data analyses, we uncover the prevailing characteristics of family businesses in the UAE and identify how the familial identification of its members is associated with structural attributes of board of directors and top management team (e.g., size, family relatedness, gender and cultural diversity). The concluding section discusses the contributions of our study and delineates priorities for future research in the field.
{"title":"Family Business Identity and Corporate Governance Attributes: Evidence on Family-Owned Enterprises in the UAE","authors":"Daniel Dupuis, M. Spraggon, V. Bodolica","doi":"10.22495/COCV14I4ART11","DOIUrl":"https://doi.org/10.22495/COCV14I4ART11","url":null,"abstract":"Over the past decades, the empirical evidence on the intersection of family businesses and corporate governance has flourished significantly in the context of developed economies. Yet, little is known to date about the effectiveness of various governance mechanisms in family-owned enterprises operating in emerging markets. Due to the evolving nature of corporate governance frameworks in these markets, family business practitioners need to enhance their knowledge about governance arrangements that may lead to superior performance outcomes. Our aim is to contribute to the literature and assist practitioners by exploring the relationship between family business identity and corporate governance attributes in family-run companies located in the UAE. Data related to organizational background, familial identification and governance devices were gathered from secondary sources for a sample of 195 UAE-based family firms. Based on quantitative data analyses, we uncover the prevailing characteristics of family businesses in the UAE and identify how the familial identification of its members is associated with structural attributes of board of directors and top management team (e.g., size, family relatedness, gender and cultural diversity). The concluding section discusses the contributions of our study and delineates priorities for future research in the field.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-06-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75415904","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Clawback policies are compensation recovery policies that provide companies with the ability to recoup incentive-based compensation in the event of a financial fraud. We investigate whether the mandatory clawback provision in the Dodd-Frank Act is necessary or whether existing provisions under the Sarbanes-Oxley Act (SOX) are sufficient in inducing problematic firms to voluntarily adopt clawbacks. Specifically, we examine the relation between financial expertise on audit committees and voluntary adoption of clawback policies in the pre-Dodd-Frank period, separating audit committee financial expertise into accounting- and non-accounting financial expertise and classifying clawbacks into fraud-based- and non-fraud based clawbacks. While firms with restatement history are more likely to adopt fraud-based clawbacks due to SOX Section 304, the financial expertise on audit committees has a mitigating effect on the voluntary adoption of clawback policies. Greater accounting financial expertise is more likely to result in voluntary adoption of fraud-based clawbacks for firms without prior restatements. On the contrary, accounting and non-financial expertise are less likely to result in the voluntary adoption of fraud-based clawbacks for firms with prior restatements. Consistent with the signaling hypothesis, this suggests that accounting experts are more in favor of adopting fraud-based clawbacks when they are not associated with any previous accounting scandals, whereas both accounting experts and non-financial experts are against adopting fraud-based clawbacks when they could be implicated by prior financial frauds. Since non-fraud based clawbacks do not serve as signals, neither accounting- nor non-accounting financial expertise is related to the adoption of non-fraud based clawbacks. Our results suggest that the mandatory clawback requirement in Dodd-Frank can eliminate the mitigating effect of audit committee financial expertise on the voluntary adoption of clawback policies.
{"title":"The Mitigating Effect of Audit Committee Financial Expertise on the Voluntary Adoption of Clawback Policies","authors":"Yan Zhang, Nan Zhou","doi":"10.2139/ssrn.2160951","DOIUrl":"https://doi.org/10.2139/ssrn.2160951","url":null,"abstract":"Clawback policies are compensation recovery policies that provide companies with the ability to recoup incentive-based compensation in the event of a financial fraud. We investigate whether the mandatory clawback provision in the Dodd-Frank Act is necessary or whether existing provisions under the Sarbanes-Oxley Act (SOX) are sufficient in inducing problematic firms to voluntarily adopt clawbacks. Specifically, we examine the relation between financial expertise on audit committees and voluntary adoption of clawback policies in the pre-Dodd-Frank period, separating audit committee financial expertise into accounting- and non-accounting financial expertise and classifying clawbacks into fraud-based- and non-fraud based clawbacks. While firms with restatement history are more likely to adopt fraud-based clawbacks due to SOX Section 304, the financial expertise on audit committees has a mitigating effect on the voluntary adoption of clawback policies. Greater accounting financial expertise is more likely to result in voluntary adoption of fraud-based clawbacks for firms without prior restatements. On the contrary, accounting and non-financial expertise are less likely to result in the voluntary adoption of fraud-based clawbacks for firms with prior restatements. Consistent with the signaling hypothesis, this suggests that accounting experts are more in favor of adopting fraud-based clawbacks when they are not associated with any previous accounting scandals, whereas both accounting experts and non-financial experts are against adopting fraud-based clawbacks when they could be implicated by prior financial frauds. Since non-fraud based clawbacks do not serve as signals, neither accounting- nor non-accounting financial expertise is related to the adoption of non-fraud based clawbacks. Our results suggest that the mandatory clawback requirement in Dodd-Frank can eliminate the mitigating effect of audit committee financial expertise on the voluntary adoption of clawback policies.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"57 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80494398","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In order to analyze firm value, investment analysts require information on potential losses from contingent liabilities such as litigation damages. However, revelation of the firm’s private estimates of the probability of loss and possible legal damages can be detrimental to the firm by increasing the costs of settlement. That is, opposing counsel may utilize the firm’s financial disclosures about contingent litigation costs to drive settlement demands. Thus, firms choose to shirk their responsibilities to disclose material litigation liabilities in their financial disclosures. Financial disclosures thereby contain insufficient information about the monetary value of potential litigation damages even for large cases with material litigation risks. This outcome is harmful to investors and management alike. I propose an accounting regulatory disclosure model that uses publicly-available data to provide noisy, but useful estimates of class action securities litigation damages in fraud on the market cases that does not require full disclosure of sensitive private information about the firm’s internal assessment of litigation merits. However, a collective action constraint prevents firms from voluntarily utilizing this information-enhancing solution without regulation to coordinate accounting disclosure requirements. I show that accounting requirements could be revised to induce mutually beneficial information disclosures that would improve the information content in financial statements with regard to contingent litigation liabilities in fraud on the market suits.
{"title":"Accounting for Contingent Litigation Liabilities: What You Disclose Can Be Used Against You","authors":"Linda Allen","doi":"10.2139/ssrn.2974342","DOIUrl":"https://doi.org/10.2139/ssrn.2974342","url":null,"abstract":"In order to analyze firm value, investment analysts require information on potential losses from contingent liabilities such as litigation damages. However, revelation of the firm’s private estimates of the probability of loss and possible legal damages can be detrimental to the firm by increasing the costs of settlement. That is, opposing counsel may utilize the firm’s financial disclosures about contingent litigation costs to drive settlement demands. Thus, firms choose to shirk their responsibilities to disclose material litigation liabilities in their financial disclosures. Financial disclosures thereby contain insufficient information about the monetary value of potential litigation damages even for large cases with material litigation risks. This outcome is harmful to investors and management alike. \u0000 \u0000I propose an accounting regulatory disclosure model that uses publicly-available data to provide noisy, but useful estimates of class action securities litigation damages in fraud on the market cases that does not require full disclosure of sensitive private information about the firm’s internal assessment of litigation merits. However, a collective action constraint prevents firms from voluntarily utilizing this information-enhancing solution without regulation to coordinate accounting disclosure requirements. I show that accounting requirements could be revised to induce mutually beneficial information disclosures that would improve the information content in financial statements with regard to contingent litigation liabilities in fraud on the market suits.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"87 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81213787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study focuses on the rule prohibiting insider trading in securities law and its effectiveness. In theory, a pending M&A activity has great potential to induce substantial price movement in the public market after its announcement. However, a prohibition of insider trading prevents people who have the knowledge about a pending M&A from using this information to garner the price difference, when a latter announcement leads to increasing public price. In this view, in an ideal world, when a prohibition of insider trading is in place and taking its full effect, the price should only start to move toward the target price right after the news of M&A activity is publicly announced. Conversely, if the stock price starts to reflect the target price before its public announcement, that implies a likely leak of private information and a failure of insider trading prohibition rule. In other words, through observing the price movements before and after the mergers and acquisitions event samples, we can produce an approximation of the effectiveness of the insider trading law in place. This paper examines M&A data in Taiwan, collecting from the disclosure system administered by Taiwan Financial Supervisory Commission from 2004 to 2016, as evidence to test the actual implementation of insider trading law in Taiwan and how forceful it is. The pattern of information leakage, when observed, provides a valuable understanding for the law enforcement department and its improvement. This result of empirical investigation, and the insight it provides, are particularly important because (1) insider trading is considered to be highly detrimental to the securities market and investor confidence, and (2) insider trading activities are not directly observable due to the secretive way the related information is exchanged and thus hard to gauge its level of actual occurrence.
{"title":"How to Test Your Insider Trading Rule and its Effectiveness?: Price Movements and the Empirical Data from Taiwan","authors":"Chien-chung Lin, Huan-Ting Wu","doi":"10.2139/ssrn.2916076","DOIUrl":"https://doi.org/10.2139/ssrn.2916076","url":null,"abstract":"This study focuses on the rule prohibiting insider trading in securities law and its effectiveness. In theory, a pending M&A activity has great potential to induce substantial price movement in the public market after its announcement. However, a prohibition of insider trading prevents people who have the knowledge about a pending M&A from using this information to garner the price difference, when a latter announcement leads to increasing public price. In this view, in an ideal world, when a prohibition of insider trading is in place and taking its full effect, the price should only start to move toward the target price right after the news of M&A activity is publicly announced. Conversely, if the stock price starts to reflect the target price before its public announcement, that implies a likely leak of private information and a failure of insider trading prohibition rule. In other words, through observing the price movements before and after the mergers and acquisitions event samples, we can produce an approximation of the effectiveness of the insider trading law in place. \u0000This paper examines M&A data in Taiwan, collecting from the disclosure system administered by Taiwan Financial Supervisory Commission from 2004 to 2016, as evidence to test the actual implementation of insider trading law in Taiwan and how forceful it is. The pattern of information leakage, when observed, provides a valuable understanding for the law enforcement department and its improvement. This result of empirical investigation, and the insight it provides, are particularly important because (1) insider trading is considered to be highly detrimental to the securities market and investor confidence, and (2) insider trading activities are not directly observable due to the secretive way the related information is exchanged and thus hard to gauge its level of actual occurrence.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88435800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We collect data on the record of every action in hundreds of derivative cases and merger class actions involving public companies filed in the Delaware Court of Chancery from 2004 to 2011. We use these data to analyze how markets respond to litigation in the most important court for corporate disputes in the United States. The detail in the dataset allows us to explore how case characteristics such as the timing of the filing, the presence of certain procedural motions, litigation intensity, and the judge assigned to the case relate to firm value. Unlike previous studies, we document that negative abnormal returns are associated with the filing of derivative cases, and we show that this association is particularly strong for cases that are first filed in Delaware and are not related to a previously disclosed government investigation. We also develop some evidence that market participants can anticipate litigation intensity and respond by valuing the firm equity less and that markets associate cases with pension fund plaintiffs with better outcomes than cases without this institutional involvement. Finally, we find little evidence of abnormal returns associated with judicial assignment at the time of filing for derivative cases, but we do observe an association be- tween judicial assignment and case filing for merger cases.
{"title":"The Shareholder Wealth Effects of Delaware Corporate Litigation","authors":"Adam B. Badawi, Daniel L. Chen","doi":"10.2139/ssrn.2108357","DOIUrl":"https://doi.org/10.2139/ssrn.2108357","url":null,"abstract":"We collect data on the record of every action in hundreds of derivative cases and merger class actions involving public companies filed in the Delaware Court of Chancery from 2004 to 2011. We use these data to analyze how markets respond to litigation in the most important court for corporate disputes in the United States. The detail in the dataset allows us to explore how case characteristics such as the timing of the filing, the presence of certain procedural motions, litigation intensity, and the judge assigned to the case relate to firm value. Unlike previous studies, we document that negative abnormal returns are associated with the filing of derivative cases, and we show that this association is particularly strong for cases that are first filed in Delaware and are not related to a previously disclosed government investigation. We also develop some evidence that market participants can anticipate litigation intensity and respond by valuing the firm equity less and that markets associate cases with pension fund plaintiffs with better outcomes than cases without this institutional involvement. Finally, we find little evidence of abnormal returns associated with judicial assignment at the time of filing for derivative cases, but we do observe an association be- tween judicial assignment and case filing for merger cases.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86172140","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Prior research presents mixed results on how managers alter their voluntary disclosures in response to investor sentiment, with evidence indicating that managers both attempt to correct and attempt to exacerbate optimistic market expectations during these critical periods. We examine a mandatory disclosure (GAAP earnings) and predict that career and litigation concerns should be sufficient to encourage the reporting of bad news more timely fashion when investor sentiment is high. We find that GAAP earnings are more (less) conservative in periods of high (low) investor sentiment, especially for companies where incentives encourage conservative reporting. Specifically, the sentiment-conservatism relationship is stronger for firms with greater sentiment-price sensitivity, higher litigation risk, Big Four auditors and stronger corporate governance.
{"title":"Investor Sentiment and Conditional Accounting Conservatism","authors":"Rui Ge, Nicholas Seybert, F. Zhang","doi":"10.2139/ssrn.2893527","DOIUrl":"https://doi.org/10.2139/ssrn.2893527","url":null,"abstract":"Prior research presents mixed results on how managers alter their voluntary disclosures in response to investor sentiment, with evidence indicating that managers both attempt to correct and attempt to exacerbate optimistic market expectations during these critical periods. We examine a mandatory disclosure (GAAP earnings) and predict that career and litigation concerns should be sufficient to encourage the reporting of bad news more timely fashion when investor sentiment is high. We find that GAAP earnings are more (less) conservative in periods of high (low) investor sentiment, especially for companies where incentives encourage conservative reporting. Specifically, the sentiment-conservatism relationship is stronger for firms with greater sentiment-price sensitivity, higher litigation risk, Big Four auditors and stronger corporate governance.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81847704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Sarbanes-Oxley Act of 2002 requires the Securities and Exchange Commission (SEC) to periodically review registrants’ filings. This study examines whether the SEC review process reveals information that is useful to stakeholders’ risk assessment decisions, beyond information available in other public filings. We use private debt contracting because there are delays in the public disclosure of SEC review correspondence, and because banks have access to private information about borrowers’ ongoing regulatory reviews or investigations. Using within sample and difference-in-differences analyses, and controlling for firm characteristics and other publicly available information at the time of the SEC review, we find that banks charge higher loan spreads to clients during and after an SEC review, and that the increase in loan spreads is higher when the review identifies material errors, issues subject to managerial discretion, and issues related to collateral valuation. These findings suggest that lenders find the information revealed during the SEC review process to be useful in debt contracting, beyond information available in 10-K and other public filings.
{"title":"SEC Comment Letters and Bank Lending","authors":"Lauren M. Cunningham, Roy Schmardebeck, Wei Wang","doi":"10.2139/ssrn.2727860","DOIUrl":"https://doi.org/10.2139/ssrn.2727860","url":null,"abstract":"The Sarbanes-Oxley Act of 2002 requires the Securities and Exchange Commission (SEC) to periodically review registrants’ filings. This study examines whether the SEC review process reveals information that is useful to stakeholders’ risk assessment decisions, beyond information available in other public filings. We use private debt contracting because there are delays in the public disclosure of SEC review correspondence, and because banks have access to private information about borrowers’ ongoing regulatory reviews or investigations. Using within sample and difference-in-differences analyses, and controlling for firm characteristics and other publicly available information at the time of the SEC review, we find that banks charge higher loan spreads to clients during and after an SEC review, and that the increase in loan spreads is higher when the review identifies material errors, issues subject to managerial discretion, and issues related to collateral valuation. These findings suggest that lenders find the information revealed during the SEC review process to be useful in debt contracting, beyond information available in 10-K and other public filings.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82041340","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The option to file a lawsuit against an entrepreneur encourages shareholders to fund projects and to retain entrepreneurs. An entrepreneur, at risk of a lawsuit filing, may save cash as a precautionary measure. When cash accumulates and a lawsuit filing does not occur, an entrepreneur increases investment in hopes of superior future performance. But if future performance wanes notwithstanding, shareholders then file a lawsuit against their entrepreneur. When cash is limited, debt may act as an alternative precautionary measure against a lawsuit filing. In summary, shareholder litigation risk can increase cash, investment, and debt.
{"title":"A Model of Shareholder Litigation as a Determinant of a Firm's Financial Policies","authors":"Vuk Talijan","doi":"10.2139/ssrn.2814348","DOIUrl":"https://doi.org/10.2139/ssrn.2814348","url":null,"abstract":"The option to file a lawsuit against an entrepreneur encourages shareholders to fund projects and to retain entrepreneurs. An entrepreneur, at risk of a lawsuit filing, may save cash as a precautionary measure. When cash accumulates and a lawsuit filing does not occur, an entrepreneur increases investment in hopes of superior future performance. But if future performance wanes notwithstanding, shareholders then file a lawsuit against their entrepreneur. When cash is limited, debt may act as an alternative precautionary measure against a lawsuit filing. In summary, shareholder litigation risk can increase cash, investment, and debt.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81660840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Financial Ombudsman Service (FOS) was established in 2008 to resolve disputes between Australian consumers and financial service providers. This article outlines the role of FOS in resolving disputes under the statutory protections for Australians in financial hardship. This article also sets out the results of a study of data collected by FOS in relation to financial hardship disputes resolved between 2010 and 2014. This data highlights the importance of FOS in a context where most disputes are resolved outside the courts, particularly in the aftermath of the global financial crisis, when the number of financial hardship disputes rose significantly.
{"title":"Australia's Financial Ombudsman Service: An Analysis of its Role in the Resolution of Financial Hardship Disputes","authors":"P. Ali, E. Bourova, Joseph Horbec, I. Ramsay","doi":"10.1002/CRQ.21187","DOIUrl":"https://doi.org/10.1002/CRQ.21187","url":null,"abstract":"The Financial Ombudsman Service (FOS) was established in 2008 to resolve disputes between Australian consumers and financial service providers. This article outlines the role of FOS in resolving disputes under the statutory protections for Australians in financial hardship. This article also sets out the results of a study of data collected by FOS in relation to financial hardship disputes resolved between 2010 and 2014. This data highlights the importance of FOS in a context where most disputes are resolved outside the courts, particularly in the aftermath of the global financial crisis, when the number of financial hardship disputes rose significantly.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"11 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85428597","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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