Scholars and policymakers now debate reforms that would prevent a bankruptcy filing from being a moment that forces valuation of the firm, crystallization of claims against it, and elimination of junior stakeholders’ interest in future appreciation in firm value. These reforms have many names, ranging from Relative Priority to Redemption Option Value. Much of the debate centers on the extent to which reform would protect the non-bankruptcy options of junior stakeholders, or harm the non-bankruptcy options of senior lenders. We argue that this focus on options misplaced. Protecting options is neither necessary nor sufficient for advancing the goal of a well-functioning bankruptcy system. What is needed is a regime that cashes out the rights of junior stakeholders with minimal judicial involvement. To illustrate, we propose an “automatic bankruptcy procedure” that gives senior creditors an option to restructure the firm’s debt or sell its assets at any time after a contractual default. Under this procedure, restructuring occurs in bankruptcy, but sales do not. Sales are either subject to warrants (which give junior stakeholders a claim on future appreciation) or are subject to judicial appraisal (which forces senior lenders to compensate junior stakeholders if the sale price was too low). Our proposal can be seen as an effort to design a formalized restructuring procedure that borrows from traditional state law governing corporate-control transactions. We show that this procedure minimizes core problems of current law — fire sales that harm junior stakeholders, delay that harms senior lenders, and the uncertainties generated by judicial valuation, which are exploited by all parties.
{"title":"Beyond Options","authors":"A. Casey, E. Morrison","doi":"10.2139/ssrn.2855954","DOIUrl":"https://doi.org/10.2139/ssrn.2855954","url":null,"abstract":"Scholars and policymakers now debate reforms that would prevent a bankruptcy filing from being a moment that forces valuation of the firm, crystallization of claims against it, and elimination of junior stakeholders’ interest in future appreciation in firm value. These reforms have many names, ranging from Relative Priority to Redemption Option Value. Much of the debate centers on the extent to which reform would protect the non-bankruptcy options of junior stakeholders, or harm the non-bankruptcy options of senior lenders. We argue that this focus on options misplaced. Protecting options is neither necessary nor sufficient for advancing the goal of a well-functioning bankruptcy system. What is needed is a regime that cashes out the rights of junior stakeholders with minimal judicial involvement. To illustrate, we propose an “automatic bankruptcy procedure” that gives senior creditors an option to restructure the firm’s debt or sell its assets at any time after a contractual default. Under this procedure, restructuring occurs in bankruptcy, but sales do not. Sales are either subject to warrants (which give junior stakeholders a claim on future appreciation) or are subject to judicial appraisal (which forces senior lenders to compensate junior stakeholders if the sale price was too low). Our proposal can be seen as an effort to design a formalized restructuring procedure that borrows from traditional state law governing corporate-control transactions. We show that this procedure minimizes core problems of current law — fire sales that harm junior stakeholders, delay that harms senior lenders, and the uncertainties generated by judicial valuation, which are exploited by all parties.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"44 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73849135","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}
Financial accounting is the language of the business world and generally accepted accounting principles (GAAP) comprise its terminology. The dictionary-like use of GAAP in business discourse conveys a conception of accounting standards as definitional rules, i.e., as rules that merely provide consensual definitions for financial discourse without affecting the content of the discourse. As such, GAAP is believed to be neutral and bias-free and consequently, promulgation of accounting standards and the content of the GAAP have not attracted much legal attention.This article challenges the prevailing legal indifference towards the GAAP and those promulgating it. By revealing GAAP's effects on corporate behavior and on the function of many social, political and financial systems that utilize accounting parameters, this article discusses the substantive power private parties gain through the promulgation of accounting standards and how these standards imply a biased agenda that prefers the investor perspective over other contrary perspectives, thereby establishing a skewed financial perception of reality, such that subordinates the social order entirely to investors’ objectives. While reviewing how the GAAP is perceived by the court, this article further argues that the existing legal perception of accounting standards as neutral definitional rules has yielded court rulings that relieved accounting standards promulgators from professional duties and has prevented judicial review of the standards themselves, leaving the GAAP and its promulgators practically immune to legal scrutiny.Attention is then drawn to a possible solution presented by a recent SEC proposal to allow domestic issuers to disclose supplemental IFRS-based financial results in addition to those required by the GAAP. It is suggested that such additional financial disclosure can curtail GAAP’s hegemony, curb its promulgators and partially ease some of the existing biases of financial accounting.
{"title":"The Gap in the Perception of the GAAP","authors":"Israel Klein","doi":"10.1111/ABLJ.12106","DOIUrl":"https://doi.org/10.1111/ABLJ.12106","url":null,"abstract":"Financial accounting is the language of the business world and generally accepted accounting principles (GAAP) comprise its terminology. The dictionary-like use of GAAP in business discourse conveys a conception of accounting standards as definitional rules, i.e., as rules that merely provide consensual definitions for financial discourse without affecting the content of the discourse. As such, GAAP is believed to be neutral and bias-free and consequently, promulgation of accounting standards and the content of the GAAP have not attracted much legal attention.This article challenges the prevailing legal indifference towards the GAAP and those promulgating it. By revealing GAAP's effects on corporate behavior and on the function of many social, political and financial systems that utilize accounting parameters, this article discusses the substantive power private parties gain through the promulgation of accounting standards and how these standards imply a biased agenda that prefers the investor perspective over other contrary perspectives, thereby establishing a skewed financial perception of reality, such that subordinates the social order entirely to investors’ objectives. While reviewing how the GAAP is perceived by the court, this article further argues that the existing legal perception of accounting standards as neutral definitional rules has yielded court rulings that relieved accounting standards promulgators from professional duties and has prevented judicial review of the standards themselves, leaving the GAAP and its promulgators practically immune to legal scrutiny.Attention is then drawn to a possible solution presented by a recent SEC proposal to allow domestic issuers to disclose supplemental IFRS-based financial results in addition to those required by the GAAP. It is suggested that such additional financial disclosure can curtail GAAP’s hegemony, curb its promulgators and partially ease some of the existing biases of financial accounting.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"36 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87476541","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}
Since 2011, the U.K. has prohibited all deal protections – including termination fees – in M&A deals. Prior to 2011, the U.K. permitted termination fees up to 1% of deal value and there was no prohibition on other protection devices. We examine the effect of this regulatory change on deal volumes, the incidence of competing offers, deal jumping rates, deal premiums, and completion rates in the U.K., relative to the other European G-10 countries. We find that M&A deal volumes in the U.K. declined significantly in the aftermath of the 2011 Reforms, relative to deal volumes in the European G-10 countries. We find no countervailing benefits to target shareholders in the form of higher deal premiums or more competing bids. Completion rates and deal jumping rates also remained unchanged. We estimate that the incidence-rate ratio of U.K. deals to non-UK deals after the reform was approximately 50% the incidence-rate ratio of U.K. deals to non-U.K. deals prior to the reform. In addition, we estimate USD 19.3 billion in lost deal volumes per quarter in the U.K. relative to the control group due to the 2011 Reforms, implying a quarterly loss of USD 3.2 billion for shareholders of U.K. companies. Our results suggest that deal protections provide an important social welfare benefit by facilitating the initiation of M&A deals.
{"title":"The Effect of Prohibiting Deal Protection in M&A: Evidence from the United Kingdom","authors":"Fernán Restrepo, Guhan Subramanian","doi":"10.2139/ssrn.2820434","DOIUrl":"https://doi.org/10.2139/ssrn.2820434","url":null,"abstract":"Since 2011, the U.K. has prohibited all deal protections – including termination fees – in M&A deals. Prior to 2011, the U.K. permitted termination fees up to 1% of deal value and there was no prohibition on other protection devices. We examine the effect of this regulatory change on deal volumes, the incidence of competing offers, deal jumping rates, deal premiums, and completion rates in the U.K., relative to the other European G-10 countries. We find that M&A deal volumes in the U.K. declined significantly in the aftermath of the 2011 Reforms, relative to deal volumes in the European G-10 countries. We find no countervailing benefits to target shareholders in the form of higher deal premiums or more competing bids. Completion rates and deal jumping rates also remained unchanged. We estimate that the incidence-rate ratio of U.K. deals to non-UK deals after the reform was approximately 50% the incidence-rate ratio of U.K. deals to non-U.K. deals prior to the reform. In addition, we estimate USD 19.3 billion in lost deal volumes per quarter in the U.K. relative to the control group due to the 2011 Reforms, implying a quarterly loss of USD 3.2 billion for shareholders of U.K. companies. Our results suggest that deal protections provide an important social welfare benefit by facilitating the initiation of M&A deals.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83361089","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 international financial reporting literature identifies a multitude of country attributes that each appear to explain financial reporting differences around the world. We first show that a single underlying factor explains across-country variation in 6 reporting quality measures used in the international literature. We then examine 72 country attributes and show that they are highly correlated and that 4 underlying factors explain most of the variation in these attributes across countries. Furthermore, individual country attributes provide essentially no incremental explanatory power for international reporting diversity over these 4 factors, which collectively explain over 70% of the variation in reporting differences. Our findings highlight the very high causal density of country attributes and thus the difficulty in attributing international reporting diversity to specific institutions and policies. We conclude with a discussion of possible future directions for research on financial reporting around the world.
{"title":"Financial Reporting Differences Around the World: What Matters?","authors":"Helena Isidro, D. Nanda, Peter D. Wysocki","doi":"10.2139/ssrn.2788741","DOIUrl":"https://doi.org/10.2139/ssrn.2788741","url":null,"abstract":"The international financial reporting literature identifies a multitude of country attributes that each appear to explain financial reporting differences around the world. We first show that a single underlying factor explains across-country variation in 6 reporting quality measures used in the international literature. We then examine 72 country attributes and show that they are highly correlated and that 4 underlying factors explain most of the variation in these attributes across countries. Furthermore, individual country attributes provide essentially no incremental explanatory power for international reporting diversity over these 4 factors, which collectively explain over 70% of the variation in reporting differences. Our findings highlight the very high causal density of country attributes and thus the difficulty in attributing international reporting diversity to specific institutions and policies. We conclude with a discussion of possible future directions for research on financial reporting around the world.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"31 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85187227","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}
Financial markets function most efficiently when all of the actors perform their functions scrupulously and through the exertion of optimal effort. However, human nature demonstrates that people will often underperform if they lack sufficient incentives. In the case of the individuals and entities acting as agents in the U.S. financial markets, if these players do not perform appropriately, everyone suffers. This fact was clearly demonstrated through the scandals of Enron and Worldcom, as well as the recent financial crisis. One promising mechanism for motivating these entities is giving them ‘skin in the game:’ a direct financial interest in the companies affected by their actions. Skin in the game has become ubiquitous with regard to corporate ‘inside’ agents — the managers and directors who act on the corporation’s behalf — by providing them with stock options, bonuses, and other methods of pay-for-performance. So if giving inside agents skin in the game tends to motivate them to act in the corporation’s best interest, would such a mechanism be appropriate for the ‘outside’ agents — entities that are not actually part of the corporation, but perform work on its behalf or on behalf of investors? This Article fills a current void in the corporate scholarship by analyzing whether two particular kinds of outside agents — credit rating agencies and proxy advisory firms — should be given skin in the game. The “skin” would be a financial incentive tied to the success of the agent’s service: rating agencies would be paid with the debt instruments they rate, and proxy advisors with share-based payment. The analysis is heavily based on principal-agent literature. The article then applies theoretical insights derived from that literature and analyzes whether skin in the game would likely be beneficial with regard to proxy advisory firms and credit rating agencies. It concludes that skin in the game would likely be beneficial when dealing with rating agencies, but should be employed cautiously when dealing with proxy advisory firms.
{"title":"Skin in the Game for Credit Rating Agencies and Proxy Advisors: Reality Meets Theory","authors":"Asaf Eckstein","doi":"10.2139/ssrn.2756033","DOIUrl":"https://doi.org/10.2139/ssrn.2756033","url":null,"abstract":"Financial markets function most efficiently when all of the actors perform their functions scrupulously and through the exertion of optimal effort. However, human nature demonstrates that people will often underperform if they lack sufficient incentives. In the case of the individuals and entities acting as agents in the U.S. financial markets, if these players do not perform appropriately, everyone suffers. This fact was clearly demonstrated through the scandals of Enron and Worldcom, as well as the recent financial crisis. One promising mechanism for motivating these entities is giving them ‘skin in the game:’ a direct financial interest in the companies affected by their actions. Skin in the game has become ubiquitous with regard to corporate ‘inside’ agents — the managers and directors who act on the corporation’s behalf — by providing them with stock options, bonuses, and other methods of pay-for-performance. So if giving inside agents skin in the game tends to motivate them to act in the corporation’s best interest, would such a mechanism be appropriate for the ‘outside’ agents — entities that are not actually part of the corporation, but perform work on its behalf or on behalf of investors? This Article fills a current void in the corporate scholarship by analyzing whether two particular kinds of outside agents — credit rating agencies and proxy advisory firms — should be given skin in the game. The “skin” would be a financial incentive tied to the success of the agent’s service: rating agencies would be paid with the debt instruments they rate, and proxy advisors with share-based payment. The analysis is heavily based on principal-agent literature. The article then applies theoretical insights derived from that literature and analyzes whether skin in the game would likely be beneficial with regard to proxy advisory firms and credit rating agencies. It concludes that skin in the game would likely be beneficial when dealing with rating agencies, but should be employed cautiously when dealing with proxy advisory firms.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87960219","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 most fundamental comparative corporate governance debates have often focused on two issues. The first one concerns ownership structure: Why are large corporations in some corporate governance system owned by a multitude of disempowered shareholders, thus effectively giving management free rein? Why are corporations typically governed by a controlling shareholder or a coalition of controlling shareholders in other systems? The second issue is the role of other ‘constituencies’ of the corporation besides shareholders, of which labor is most central to the debate. Some jurisdictions explicitly give labor an influential voice in corporate affairs, whereas in others its influence is developed through factual power or unintended consequences of legislation. This chapter explores the interactions between firm ownership and labor, focusing on the United States on the one hand and Continental Europe, particularly Germany, on the other. It distinguishes between ‘old’ and ‘new’ comparative corporate governance, the former referring to the dichotomy studied by scholars of comparative corporate law up to the early 2000s. Recent changes, heralded by intermediated, but widespread share ownership are leading us to a new equilibrium whose contours have only begun to emerge. Over the past decades, outside investors have gained power both in the United States and in Continental Europe. However, neither in the US nor in Continental Europe has the traditional corporate governance system been completely superseded by a new one. The US remains to a large extent manager-centric. Continental Europe retains powerful large shareholders, and labor as an independent force has remained more important than in the United States. Outside institutional investors – sometimes from the US – have become a player to be reckoned with, thus adding an additional layer of complexity to the system.
{"title":"Comparative Corporate Governance: Old and New","authors":"Martin Gelter","doi":"10.2139/ssrn.2756038","DOIUrl":"https://doi.org/10.2139/ssrn.2756038","url":null,"abstract":"The most fundamental comparative corporate governance debates have often focused on two issues. The first one concerns ownership structure: Why are large corporations in some corporate governance system owned by a multitude of disempowered shareholders, thus effectively giving management free rein? Why are corporations typically governed by a controlling shareholder or a coalition of controlling shareholders in other systems? The second issue is the role of other ‘constituencies’ of the corporation besides shareholders, of which labor is most central to the debate. Some jurisdictions explicitly give labor an influential voice in corporate affairs, whereas in others its influence is developed through factual power or unintended consequences of legislation. This chapter explores the interactions between firm ownership and labor, focusing on the United States on the one hand and Continental Europe, particularly Germany, on the other. It distinguishes between ‘old’ and ‘new’ comparative corporate governance, the former referring to the dichotomy studied by scholars of comparative corporate law up to the early 2000s. Recent changes, heralded by intermediated, but widespread share ownership are leading us to a new equilibrium whose contours have only begun to emerge. Over the past decades, outside investors have gained power both in the United States and in Continental Europe. However, neither in the US nor in Continental Europe has the traditional corporate governance system been completely superseded by a new one. The US remains to a large extent manager-centric. Continental Europe retains powerful large shareholders, and labor as an independent force has remained more important than in the United States. Outside institutional investors – sometimes from the US – have become a player to be reckoned with, thus adding an additional layer of complexity to the system.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"105 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80759615","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}
Pub Date : 2016-02-18DOI: 10.1093/OXFORDHB/9780198743682.013.3
Henry Hansmann, Richard Squire
This chapter analyzes the economic consequences of external and internal asset partitioning, and it considers implications of this analysis for creditor remedies. External partitioning refers to the legal boundaries between business firms and their equity investors, while internal partitioning refers to the legal boundaries within corporate groups. The chapter begins by cataloguing the benefits and costs of corporate partitioning; it then employs this catalogue to analyze the relative economics of external and internal partitioning. Non-partitioning functions of subsidiaries also are identified. The chapter then considers whether cost-benefit analysis predicts how courts actually apply de-partitioning remedies, with particular emphasis on veil piercing and enterprise liability. The chapter concludes by arguing that courts should employ the distinction between external and internal partitioning when applying creditor remedies that disregard corporate partitions, and it identifies factors — in addition to whether a partition is internal or external — that courts should consider when deciding whether to de-partition.
{"title":"External and Internal Asset Partitioning: Corporations and Their Subsidiaries","authors":"Henry Hansmann, Richard Squire","doi":"10.1093/OXFORDHB/9780198743682.013.3","DOIUrl":"https://doi.org/10.1093/OXFORDHB/9780198743682.013.3","url":null,"abstract":"This chapter analyzes the economic consequences of external and internal asset partitioning, and it considers implications of this analysis for creditor remedies. External partitioning refers to the legal boundaries between business firms and their equity investors, while internal partitioning refers to the legal boundaries within corporate groups. The chapter begins by cataloguing the benefits and costs of corporate partitioning; it then employs this catalogue to analyze the relative economics of external and internal partitioning. Non-partitioning functions of subsidiaries also are identified. The chapter then considers whether cost-benefit analysis predicts how courts actually apply de-partitioning remedies, with particular emphasis on veil piercing and enterprise liability. The chapter concludes by arguing that courts should employ the distinction between external and internal partitioning when applying creditor remedies that disregard corporate partitions, and it identifies factors — in addition to whether a partition is internal or external — that courts should consider when deciding whether to de-partition.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"49 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77364619","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 condition of ensuring a permanent economic growth and development is an investment activity which includes the foreign direct investment (“FDI”). The issue of examination of FDI in the business environment, under existing conditions created by dynamically changing regulatory environment, in connection with the performance and efficiency of businesses, has an impact on the overall economic level of the country at last. A crucial component of the rise of transnational capital is the growth of FDI, shifting of investors' capital as a productive investment into one or more foreign countries. FDI inflow is determined by the entire legal system of a particular state. An inevitable factor influencing the decision to invest in a particular country is the quality and stability of legal regulation of the business environment and equally important factor is the enforcement of legal claims. The key role is played by procedural rules in this respect. Regarding the above mentioned, it should be emphasized that national legal regulation significantly determines the decision to invest in a particular country. Poor enforcement of law is considered as a significant competitive disadvantage in case of Slovak Republic. In the area of public law, the regulation of taxation plays a major concerning the impact on the business environment. As standard methods of scientific research for the given topic, methods of analysis, synthesis, deduction, and comparison will be used together with historic method.
{"title":"The Impact of Legislation on Foreign Direct Investments in Slovak Republic","authors":"Anna Vartašová, Karolína Červená, M. Bujňáková","doi":"10.2139/ssrn.3812350","DOIUrl":"https://doi.org/10.2139/ssrn.3812350","url":null,"abstract":"The condition of ensuring a permanent economic growth and development is an investment activity which includes the foreign direct investment (“FDI”). The issue of examination of FDI in the business environment, under existing conditions created by dynamically changing regulatory environment, in connection with the performance and efficiency of businesses, has an impact on the overall economic level of the country at last. A crucial component of the rise of transnational capital is the growth of FDI, shifting of investors' capital as a productive investment into one or more foreign countries. FDI inflow is determined by the entire legal system of a particular state. An inevitable factor influencing the decision to invest in a particular country is the quality and stability of legal regulation of the business environment and equally important factor is the enforcement of legal claims. The key role is played by procedural rules in this respect. Regarding the above mentioned, it should be emphasized that national legal regulation significantly determines the decision to invest in a particular country. Poor enforcement of law is considered as a significant competitive disadvantage in case of Slovak Republic. In the area of public law, the regulation of taxation plays a major concerning the impact on the business environment. As standard methods of scientific research for the given topic, methods of analysis, synthesis, deduction, and comparison will be used together with historic method.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"107 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80542434","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 Article examines how the stock market reacts to the filing of lawsuits against mergers and acquisitions targets as the quality of the plaintiffs’ law firm varies. Our primary dataset includes all cases of this type filed in the Delaware Chancery Court from November 2003–September 2008. We group the law firms that file these suits into higher and lower quality categories using several quantitative and qualitative measures. We hypothesize that target firm share value should reflect the likelihood that litigation will result in an increase in merger consideration. This effect is likely to depend, at least in part, on law firm quality. Our evidence is broadly consistent with this hypothesis, and we find similar results when we restrict the analysis to those cases filed several days after the announcement of the deal. Likewise, we find that the effect of law firm quality on firm value endures when we include cases filed after the beginning of the financial crisis. We discuss the implications of these results for debates about the value of corporate litigation.
{"title":"Does the Quality of the Plaintiffs' Law Firm Matter in Deal Litigation?","authors":"Adam B. Badawi, David H. Webber","doi":"10.2139/ssrn.2469573","DOIUrl":"https://doi.org/10.2139/ssrn.2469573","url":null,"abstract":"This Article examines how the stock market reacts to the filing of lawsuits against mergers and acquisitions targets as the quality of the plaintiffs’ law firm varies. Our primary dataset includes all cases of this type filed in the Delaware Chancery Court from November 2003–September 2008. We group the law firms that file these suits into higher and lower quality categories using several quantitative and qualitative measures. We hypothesize that target firm share value should reflect the likelihood that litigation will result in an increase in merger consideration. This effect is likely to depend, at least in part, on law firm quality. Our evidence is broadly consistent with this hypothesis, and we find similar results when we restrict the analysis to those cases filed several days after the announcement of the deal. Likewise, we find that the effect of law firm quality on firm value endures when we include cases filed after the beginning of the financial crisis. We discuss the implications of these results for debates about the value of corporate litigation.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"59 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90325302","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 the aftermath of the 2007-08 financial crises, regulatory reforms of the financial system came to include a role for central counterparts, which are expected to improve the stability of derivatives markets. Using an agent-based model simulation, this study suggests that central counterparts help achieving this policy objective. The introduction of central counterparts, however, can also stimulate novel patterns of industrial dynamics, especially in the form of possible fragmentation of the derivatives market into segregated networks around different central counterparts. It seems, moreover, that even the presence of central counterparts does not provide full safeguard to the preservation of the stability of the financial system, depending on the occurrence of relatively high credit default losses.
{"title":"Do Central Counterparts Improve the Stability of Derivatives Market? Some Evidence from an Agent-Based Model","authors":"Alberto Asquer, Inna Krachkovskaya","doi":"10.2139/ssrn.2702666","DOIUrl":"https://doi.org/10.2139/ssrn.2702666","url":null,"abstract":"In the aftermath of the 2007-08 financial crises, regulatory reforms of the financial system came to include a role for central counterparts, which are expected to improve the stability of derivatives markets. Using an agent-based model simulation, this study suggests that central counterparts help achieving this policy objective. The introduction of central counterparts, however, can also stimulate novel patterns of industrial dynamics, especially in the form of possible fragmentation of the derivatives market into segregated networks around different central counterparts. It seems, moreover, that even the presence of central counterparts does not provide full safeguard to the preservation of the stability of the financial system, depending on the occurrence of relatively high credit default losses.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78680097","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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