Adam B. Badawi, Matthew D. Cain, Steven Davidoff Solomon
We use the shifting nature of Delaware’s disclosure requirements for fairness opinions in tender offers to assess the impact of voluntary versus mandatory disclosure. To do so, we obtain the disclosures of details in fairness opinions by the targets of over 900 tender offers from 1995 to 2019. Over this period, the disclosure regime for tender offers transitioned from a voluntary one to a mandatory one. We document that the disclosure rates of details in fairness opinions are low under voluntary rules and rise steadily as Delaware courts became increasingly insistent on the disclosure of these details. We also show that proshareholder changes to tender offers are associated with disclosure of tender offer details only under the voluntary regime. These results highlight the complexity of predicting the effects of disclosure rules and provide empirical support for theoretical work that argues that mandatory-disclosure regimes can narrow opportunities to signal.
{"title":"Does Voluntary Financial Disclosure Matter? The Case of Fairness Opinions in Mergers and Acquisitions","authors":"Adam B. Badawi, Matthew D. Cain, Steven Davidoff Solomon","doi":"10.1086/723790","DOIUrl":"https://doi.org/10.1086/723790","url":null,"abstract":"We use the shifting nature of Delaware’s disclosure requirements for fairness opinions in tender offers to assess the impact of voluntary versus mandatory disclosure. To do so, we obtain the disclosures of details in fairness opinions by the targets of over 900 tender offers from 1995 to 2019. Over this period, the disclosure regime for tender offers transitioned from a voluntary one to a mandatory one. We document that the disclosure rates of details in fairness opinions are low under voluntary rules and rise steadily as Delaware courts became increasingly insistent on the disclosure of these details. We also show that proshareholder changes to tender offers are associated with disclosure of tender offer details only under the voluntary regime. These results highlight the complexity of predicting the effects of disclosure rules and provide empirical support for theoretical work that argues that mandatory-disclosure regimes can narrow opportunities to signal.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"7 1","pages":"535 - 555"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139352975","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 examine the role of political connections in receiving federal funds during an unexpected surge in government defense spending. While the data do not allow identification of a causal link, the analysis shows that politically connected firms were awarded larger amounts in federal contracts when available funds increased. Defense contracts awarded to firms that lobbied were around onethird higher than contracts awarded to firms that did not lobby. Similar evidence holds for campaign contributions and board connections. The increase in the contract amount is observed primarily for firms with limited ability to efficiently support the Pentagon’s efforts and when contracts received less scrutiny. Between political connections and merit as potential channels to affect government contracting, the results mainly, but not exclusively, support the first channel.
{"title":"The Lion’s Share: Evidence from Federal Contracts on the Value of Political Connections","authors":"Şenay Ağca, Deniz Igan","doi":"10.1086/724288","DOIUrl":"https://doi.org/10.1086/724288","url":null,"abstract":"We examine the role of political connections in receiving federal funds during an unexpected surge in government defense spending. While the data do not allow identification of a causal link, the analysis shows that politically connected firms were awarded larger amounts in federal contracts when available funds increased. Defense contracts awarded to firms that lobbied were around onethird higher than contracts awarded to firms that did not lobby. Similar evidence holds for campaign contributions and board connections. The increase in the contract amount is observed primarily for firms with limited ability to efficiently support the Pentagon’s efforts and when contracts received less scrutiny. Between political connections and merit as potential channels to affect government contracting, the results mainly, but not exclusively, support the first channel.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"16 1","pages":"609 - 638"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139352195","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}
Admission processes in many higher-education markets are inherently dynamic. We study the timing of students’ applications and schools’ admissions under rolling admissions using unique data on US law schools. Our results show that law schools employ nonstationary admission standards within application cycles: applications submitted earlier enjoy a considerable advantage relative to later applications.
{"title":"Dynamic Decision-Making under Rolling Admissions: Evidence from US Law School Applications","authors":"Yao Luo, Y. Wang","doi":"10.1086/724499","DOIUrl":"https://doi.org/10.1086/724499","url":null,"abstract":"Admission processes in many higher-education markets are inherently dynamic. We study the timing of students’ applications and schools’ admissions under rolling admissions using unique data on US law schools. Our results show that law schools employ nonstationary admission standards within application cycles: applications submitted earlier enjoy a considerable advantage relative to later applications.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"120 1","pages":"433 - 463"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139352522","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}
How does partisan gerrymandering affect turnout for US House elections? Common measures of gerrymandering are a function of turnout, which makes assessments of the impacts on turnout difficult. We present evidence from two natural experiments. First, using a nationwide sample, we construct a state-level measure of gerrymandering based on the partisan composition of districts and leverage variation stemming from congressional redistricting. Second, we draw on Pennsylvania and Ohio voter files and leverage the court-ordered redrawing of Pennsylvania districts in 2018 aimed at undoing partisan gerrymandering. Both approaches reveal that higher levels of partisan gerrymandering causally reduce turnout.
{"title":"Partisan Gerrymandering and Turnout","authors":"Daniel Jones, Neil Silveus, Carly Urban","doi":"10.1086/725767","DOIUrl":"https://doi.org/10.1086/725767","url":null,"abstract":"How does partisan gerrymandering affect turnout for US House elections? Common measures of gerrymandering are a function of turnout, which makes assessments of the impacts on turnout difficult. We present evidence from two natural experiments. First, using a nationwide sample, we construct a state-level measure of gerrymandering based on the partisan composition of districts and leverage variation stemming from congressional redistricting. Second, we draw on Pennsylvania and Ohio voter files and leverage the court-ordered redrawing of Pennsylvania districts in 2018 aimed at undoing partisan gerrymandering. Both approaches reveal that higher levels of partisan gerrymandering causally reduce turnout.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"22 1","pages":"557 - 579"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139352991","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}
B. Eckbo, D. College, Kai Li, David Smith, Jan Starmans, Anjan Thakor, Karin S. Thorburn, Shyam Venkatesan, Jingjing Zhang, Anthony Georgiades, Guangli Lu, Mitchell Schinbein, Chelsea Yang, Yan Yang, Shu Zhang, Shimei Zhou
With a hand-collected set of 545 debtor-in-possession (DIP) loan facilities for 2002–19, we show that these short-term loans are highly overcollateralized and contain a comprehensive set of restrictive covenants, mandatory prepayments, and restructuring milestones—all of which help produce a repayment risk near 0. Nevertheless, the all-in spread drawn averages 658 basis points—almost five times the average spread on matched investment-grade loans and nearly double the average spread on matched leveraged loans issued by highly risky firms outside of bankruptcy. Textual analysis of court documents shows lack of outside lenders’ participation in the loan solicitation process, but spreads are somewhat lower when outside interest is high. We discuss alternative interpretations of the high DIP loan spreads, ranging from monitoring-cost compensation to rent extraction as DIP loan providers with strong bargaining power share in the preservation of going-concern value helped by the last-resort loan. “The question this debtor had to ask, is: Is this [debtor-in-possession loan] better than a liquidation?” (Mark Ellenberg, in Kary [2009]) “In the Great Recession default cycle, no [debtor-in-possession loans] defaulted.” (David Keisman, in Adler [2016]) “The question this debtor had to ask, is: Is this [debtor-in-possession loan] better than a liquidation?” (Mark Ellenberg, in Kary [2009]) “In the Great Recession default cycle, no [debtor-in-possession loans] defaulted.” (David Keisman, in Adler [2016])
{"title":"Loans to Chapter 11 Firms: Contract Design, Repayment Risk, and Pricing","authors":"B. Eckbo, D. College, Kai Li, David Smith, Jan Starmans, Anjan Thakor, Karin S. Thorburn, Shyam Venkatesan, Jingjing Zhang, Anthony Georgiades, Guangli Lu, Mitchell Schinbein, Chelsea Yang, Yan Yang, Shu Zhang, Shimei Zhou","doi":"10.1086/724421","DOIUrl":"https://doi.org/10.1086/724421","url":null,"abstract":"With a hand-collected set of 545 debtor-in-possession (DIP) loan facilities for 2002–19, we show that these short-term loans are highly overcollateralized and contain a comprehensive set of restrictive covenants, mandatory prepayments, and restructuring milestones—all of which help produce a repayment risk near 0. Nevertheless, the all-in spread drawn averages 658 basis points—almost five times the average spread on matched investment-grade loans and nearly double the average spread on matched leveraged loans issued by highly risky firms outside of bankruptcy. Textual analysis of court documents shows lack of outside lenders’ participation in the loan solicitation process, but spreads are somewhat lower when outside interest is high. We discuss alternative interpretations of the high DIP loan spreads, ranging from monitoring-cost compensation to rent extraction as DIP loan providers with strong bargaining power share in the preservation of going-concern value helped by the last-resort loan. “The question this debtor had to ask, is: Is this [debtor-in-possession loan] better than a liquidation?” (Mark Ellenberg, in Kary [2009]) “In the Great Recession default cycle, no [debtor-in-possession loans] defaulted.” (David Keisman, in Adler [2016]) “The question this debtor had to ask, is: Is this [debtor-in-possession loan] better than a liquidation?” (Mark Ellenberg, in Kary [2009]) “In the Great Recession default cycle, no [debtor-in-possession loans] defaulted.” (David Keisman, in Adler [2016])","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"55 1","pages":"465 - 509"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139352465","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}
While the effects of labor unions on objective conditions have been extensively studied, little is known about their role in individuals’ perceptions of economic circumstances. We investigate whether union density affects the subjective well-being of area residents by exploiting the staggered adoption of right-to-work laws in the United States through a border-county design. We find that unionization promotes happiness for those of low socioeconomic status, including non-college-educated residents and current or former blue-collar job holders, but has no discernible impact on their high-status counterparts. Of affected residents, workers stand to reap the most benefit. We also find that the favorable effect of unionization is transmitted through the assessment of improved financial situation, personal health, and workplace quality. This finding highlights the role of pecuniary and nonpecuniary benefits (for example, on-the-job safety, work-life balance, interpersonal trust, and workers’ autonomy) that unions afford to protect society’s most marginalized groups.
{"title":"Declining Unionization and the Despair of the Working Class","authors":"K. Chen, S. Islam","doi":"10.1086/724221","DOIUrl":"https://doi.org/10.1086/724221","url":null,"abstract":"While the effects of labor unions on objective conditions have been extensively studied, little is known about their role in individuals’ perceptions of economic circumstances. We investigate whether union density affects the subjective well-being of area residents by exploiting the staggered adoption of right-to-work laws in the United States through a border-county design. We find that unionization promotes happiness for those of low socioeconomic status, including non-college-educated residents and current or former blue-collar job holders, but has no discernible impact on their high-status counterparts. Of affected residents, workers stand to reap the most benefit. We also find that the favorable effect of unionization is transmitted through the assessment of improved financial situation, personal health, and workplace quality. This finding highlights the role of pecuniary and nonpecuniary benefits (for example, on-the-job safety, work-life balance, interpersonal trust, and workers’ autonomy) that unions afford to protect society’s most marginalized groups.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"6 1","pages":"279 - 307"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74243745","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}
Using census data, we study false birth-date registrations in Italy, a phenomenon well known to demographers, in a setting that allows us to separate honesty from the benefits of cheating and deterrence. By comparing migrants leaving a locality with those who remain in it, we illustrate the tendency of Italians to sort themselves across geographic areas according to their honesty levels. Over time, this tendency has modified the average honesty level in each locality, with relevant consequences for the distribution across geographic areas of outcomes like human capital, productivity, earnings growth, and the quality of local politicians and government.
{"title":"Rule Breaking, Honesty, and Migration","authors":"M. Anelli, Tommaso Colussi, A. Ichino","doi":"10.1086/723112","DOIUrl":"https://doi.org/10.1086/723112","url":null,"abstract":"Using census data, we study false birth-date registrations in Italy, a phenomenon well known to demographers, in a setting that allows us to separate honesty from the benefits of cheating and deterrence. By comparing migrants leaving a locality with those who remain in it, we illustrate the tendency of Italians to sort themselves across geographic areas according to their honesty levels. Over time, this tendency has modified the average honesty level in each locality, with relevant consequences for the distribution across geographic areas of outcomes like human capital, productivity, earnings growth, and the quality of local politicians and government.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"41 1","pages":"409 - 432"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85842686","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 incompleteness of employment contracts may leave inventors vulnerable to ex post opportunism by their employers, which could curtail their innovative effort. We use passage of freedom-to-create laws by seven US states as a natural experiment to investigate whether laws strengthening the property rights of inventors against employers’ opportunism can foster innovation. We employ a difference-in-differences design that includes a rich set of state, technology, and time fixed effects to compare the quantity and quality of patenting in these seven states vis-à-vis synthetic control states. The laws increased both the number of patents (by 14 percent) and their quality (according to various measures, including citations and the extent of pathbreaking innovation). The increase in innovation was broad, observed for both firm-specific and generic innovation and in firms with and without prior patents.
{"title":"Does Strengthening the Property Rights of Employee-Inventors Spur Innovation? Empirical Evidence on Freedom-to-Create Laws Passed by US States","authors":"Shashwat Alok, K. Subramanian","doi":"10.1086/725533","DOIUrl":"https://doi.org/10.1086/725533","url":null,"abstract":"The incompleteness of employment contracts may leave inventors vulnerable to ex post opportunism by their employers, which could curtail their innovative effort. We use passage of freedom-to-create laws by seven US states as a natural experiment to investigate whether laws strengthening the property rights of inventors against employers’ opportunism can foster innovation. We employ a difference-in-differences design that includes a rich set of state, technology, and time fixed effects to compare the quantity and quality of patenting in these seven states vis-à-vis synthetic control states. The laws increased both the number of patents (by 14 percent) and their quality (according to various measures, including citations and the extent of pathbreaking innovation). The increase in innovation was broad, observed for both firm-specific and generic innovation and in firms with and without prior patents.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"1 1","pages":"369 - 408"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74378102","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}
{"title":"Front Matter","authors":"","doi":"10.1086/727555","DOIUrl":"https://doi.org/10.1086/727555","url":null,"abstract":"","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135517261","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 assess firearms as a means of Black residents’ self-defense in the Jim Crow South. We infer access to firearms by race and place by measuring the fraction of suicides committed with a firearm. Corroborating anecdotal accounts and historical claims, state bans on pistols and increases in White law enforcement personnel served as mechanisms to disarm the Black community, while having no comparable effect on White residents’ firearm access. The interaction of these mechanisms with changing national market prices for firearms provides a credible identification strategy for Black residents’ firearm access. Rates of Black residents’ lynching decreased with their greater access to firearms. I had already determined to sell my life as dearly as possible if attacked. I felt if I could take one lyncher with me, this would even up the score a little bit. (Wells 1970, p. 62) I had already determined to sell my life as dearly as possible if attacked. I felt if I could take one lyncher with me, this would even up the score a little bit. (Wells 1970, p. 62)
{"title":"Firearms and Lynching","authors":"M. Makowsky, Patrick L. Warren","doi":"10.1086/722595","DOIUrl":"https://doi.org/10.1086/722595","url":null,"abstract":"We assess firearms as a means of Black residents’ self-defense in the Jim Crow South. We infer access to firearms by race and place by measuring the fraction of suicides committed with a firearm. Corroborating anecdotal accounts and historical claims, state bans on pistols and increases in White law enforcement personnel served as mechanisms to disarm the Black community, while having no comparable effect on White residents’ firearm access. The interaction of these mechanisms with changing national market prices for firearms provides a credible identification strategy for Black residents’ firearm access. Rates of Black residents’ lynching decreased with their greater access to firearms. I had already determined to sell my life as dearly as possible if attacked. I felt if I could take one lyncher with me, this would even up the score a little bit. (Wells 1970, p. 62) I had already determined to sell my life as dearly as possible if attacked. I felt if I could take one lyncher with me, this would even up the score a little bit. (Wells 1970, p. 62)","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"66 1","pages":"259 - 278"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90719568","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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