This paper studies Securities and Exchange Commission (SEC) no-action-letter decisions that determine whether companies can exclude shareholder proposals from their proxy statements. During 2007–19, the market reacted positively when the SEC permitted exclusion, which suggests that investors viewed those proposals as value reducing on average. We also find that a company’s stock price decreased over time while waiting for an SEC decision, which suggests that challenged proposals imposed distraction costs on companies. The SEC’s decisions can be predicted by regulatory rules but are also related to a proposal’s predicted votes—more popular types of proposals were less likely to be removed. We find no robust evidence that no-action-letter decisions differed when the SEC was controlled by Democrats versus Republicans. Taken together, the evidence suggests that managers may be serving shareholder interests in opposing some proposals and that the no-action-letter process may be helping shareholders by weeding out value-reducing proposals.
{"title":"Can Shareholder Proposals Hurt Shareholders? Evidence from Securities and Exchange Commission No-Action-Letter Decisions","authors":"J. Matsusaka, O. Ozbas, Irene Yi","doi":"10.1086/710828","DOIUrl":"https://doi.org/10.1086/710828","url":null,"abstract":"This paper studies Securities and Exchange Commission (SEC) no-action-letter decisions that determine whether companies can exclude shareholder proposals from their proxy statements. During 2007–19, the market reacted positively when the SEC permitted exclusion, which suggests that investors viewed those proposals as value reducing on average. We also find that a company’s stock price decreased over time while waiting for an SEC decision, which suggests that challenged proposals imposed distraction costs on companies. The SEC’s decisions can be predicted by regulatory rules but are also related to a proposal’s predicted votes—more popular types of proposals were less likely to be removed. We find no robust evidence that no-action-letter decisions differed when the SEC was controlled by Democrats versus Republicans. Taken together, the evidence suggests that managers may be serving shareholder interests in opposing some proposals and that the no-action-letter process may be helping shareholders by weeding out value-reducing proposals.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"6 1","pages":"107 - 152"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88833480","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 nationally representative survey data on 11,505 labor force participants, we examine the use and implementation of noncompete agreements and the employee outcomes associated with these provisions. Approximately 18 percent of labor force participants are bound by noncompetes, with 38 percent having agreed to at least one in the past. Noncompetes are more likely to be found in high-skill, high-paying jobs, but they are also common in low-skill, low-paying jobs and in states where noncompetes are unenforceable. Only 10 percent of employees negotiate over their noncompetes, and about one-third of employees are presented with noncompetes after having already accepted job offers. Early-notice noncompetes are associated with better employee outcomes, while employees who agree to late-notice noncompetes are comparatively worse off. Regardless of noncompete timing, however, wages are relatively lower where noncompetes are easier to enforce. We discuss these findings in light of competing theories of the economic value of noncompetes.
{"title":"Noncompete Agreements in the US Labor Force","authors":"Evan Starr, JJ Prescott, Norman Bishara","doi":"10.1086/712206","DOIUrl":"https://doi.org/10.1086/712206","url":null,"abstract":"Using nationally representative survey data on 11,505 labor force participants, we examine the use and implementation of noncompete agreements and the employee outcomes associated with these provisions. Approximately 18 percent of labor force participants are bound by noncompetes, with 38 percent having agreed to at least one in the past. Noncompetes are more likely to be found in high-skill, high-paying jobs, but they are also common in low-skill, low-paying jobs and in states where noncompetes are unenforceable. Only 10 percent of employees negotiate over their noncompetes, and about one-third of employees are presented with noncompetes after having already accepted job offers. Early-notice noncompetes are associated with better employee outcomes, while employees who agree to late-notice noncompetes are comparatively worse off. Regardless of noncompete timing, however, wages are relatively lower where noncompetes are easier to enforce. We discuss these findings in light of competing theories of the economic value of noncompetes.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"64 1","pages":"53 - 84"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86490183","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}
I study the role of culture in firms’ compliance decisions in the context of the EU Emissions Trading Scheme, an international regulation implemented in multiple countries with different levels of cultural indicators. To probe causality, I look within countries and exploit the differences in the locations of central headquarters of multinational firms. Using trust as a main cultural indicator, this exercise reveals that installations owned by firms headquartered in high-trust countries were more likely to comply with the regulation than those owned by firms headquartered in low-trust countries, even when they operated in the same geographic area. Using other relevant indicators of culture such as morality and civic virtue yields similar results, which suggests that culture, measured by several indicators, exerts influence on the compliance behavior of firms.
{"title":"Culture and Compliance: Evidence from the European Union Emissions Trading Scheme","authors":"Ara Jo","doi":"10.1086/711158","DOIUrl":"https://doi.org/10.1086/711158","url":null,"abstract":"I study the role of culture in firms’ compliance decisions in the context of the EU Emissions Trading Scheme, an international regulation implemented in multiple countries with different levels of cultural indicators. To probe causality, I look within countries and exploit the differences in the locations of central headquarters of multinational firms. Using trust as a main cultural indicator, this exercise reveals that installations owned by firms headquartered in high-trust countries were more likely to comply with the regulation than those owned by firms headquartered in low-trust countries, even when they operated in the same geographic area. Using other relevant indicators of culture such as morality and civic virtue yields similar results, which suggests that culture, measured by several indicators, exerts influence on the compliance behavior of firms.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"76 1","pages":"181 - 205"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91000291","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 the landmark ruling in Goodridge v. Department of Public Health in 2004, the legalization of same-sex marriage (SSM) has proliferated throughout the United States via either legislative action or court order. Advocates of SSM laws argue that marriage equality will generate important health benefits not only for adult same-sex couples but also for lesbian, gay, bisexual, and questioning (LGBQ) youths. Using data from the state Youth Risk Behavior Survey for the period 1999–2017, we explore the relationship between marriage equality and suicidal behaviors among LGBQ-identifying youths. We find little evidence that SSM laws have reduced suicide attempts among teen sexual minorities, nor have they decreased the likelihood of suicide planning, suicidal ideation, or depression. Instead, we find some evidence that SSM legalization via judicial mandate is associated with worse mental health for these youths.
{"title":"Marriage Equality Laws and Youth Mental Health","authors":"D. Anderson, K. Matsuzawa, Joseph J. Sabia","doi":"10.1086/711128","DOIUrl":"https://doi.org/10.1086/711128","url":null,"abstract":"Since the landmark ruling in Goodridge v. Department of Public Health in 2004, the legalization of same-sex marriage (SSM) has proliferated throughout the United States via either legislative action or court order. Advocates of SSM laws argue that marriage equality will generate important health benefits not only for adult same-sex couples but also for lesbian, gay, bisexual, and questioning (LGBQ) youths. Using data from the state Youth Risk Behavior Survey for the period 1999–2017, we explore the relationship between marriage equality and suicidal behaviors among LGBQ-identifying youths. We find little evidence that SSM laws have reduced suicide attempts among teen sexual minorities, nor have they decreased the likelihood of suicide planning, suicidal ideation, or depression. Instead, we find some evidence that SSM legalization via judicial mandate is associated with worse mental health for these youths.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"108 1","pages":"29 - 51"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74864110","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 paper evaluates the impacts of the Lifeline subsidy on high-speed Internet prices, demand, and welfare. Results show that low-income households would require large price reductions to subscribe to basic broadband. Simulations of competition between cable and telephone firms show that the $9.25 subsidy lowers the prices for low-quality plans and incentivizes about 6 percent of low-income households to take up high-speed Internet. When firms price discriminate by charging different prices to low- and high-income households choosing the same plan, about 25 percent of low-income households enter the market and consume high-speed Internet. When the social planner sets prices and price discriminates, 68 percent of low-income households enter the market, and more higher-speed plans are consumed.
{"title":"The Impacts of the Lifeline Subsidy on High-Speed Internet Access","authors":"Samara Mendez, Gabor Molnar, Scott J. Savage","doi":"10.1086/714504","DOIUrl":"https://doi.org/10.1086/714504","url":null,"abstract":"This paper evaluates the impacts of the Lifeline subsidy on high-speed Internet prices, demand, and welfare. Results show that low-income households would require large price reductions to subscribe to basic broadband. Simulations of competition between cable and telephone firms show that the $9.25 subsidy lowers the prices for low-quality plans and incentivizes about 6 percent of low-income households to take up high-speed Internet. When firms price discriminate by charging different prices to low- and high-income households choosing the same plan, about 25 percent of low-income households enter the market and consume high-speed Internet. When the social planner sets prices and price discriminates, 68 percent of low-income households enter the market, and more higher-speed plans are consumed.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"12 1","pages":"745 - 782"},"PeriodicalIF":0.0,"publicationDate":"2021-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90297357","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}
D. Donelson, Antonis Kartapanis, Christopher G. Yust
This study examines the role of media coverage in meritorious shareholder litigation. Asserting a causal effect of the media on litigation is normally difficult because of the endogenous nature of media coverage. However, we use the Wall Street Journal’s coverage of stock option backdating to overcome these issues. Using a matched sample of firms with similar probabilities of backdating and related government investigations, we find consistent evidence of a causal relation between media coverage and meritorious litigation. We also find a negative abnormal market reaction to the articles and conduct a variety of analyses to show that it was the content of the articles, rather than the coverage itself, that resulted in litigation. Our results demonstrate that the media serves an important role in corporate accountability that both disincentivizes misconduct and holds firms accountable.
{"title":"Does Media Coverage Cause Meritorious Shareholder Litigation? Evidence from the Stock Option Backdating Scandal","authors":"D. Donelson, Antonis Kartapanis, Christopher G. Yust","doi":"10.1086/712832","DOIUrl":"https://doi.org/10.1086/712832","url":null,"abstract":"This study examines the role of media coverage in meritorious shareholder litigation. Asserting a causal effect of the media on litigation is normally difficult because of the endogenous nature of media coverage. However, we use the Wall Street Journal’s coverage of stock option backdating to overcome these issues. Using a matched sample of firms with similar probabilities of backdating and related government investigations, we find consistent evidence of a causal relation between media coverage and meritorious litigation. We also find a negative abnormal market reaction to the articles and conduct a variety of analyses to show that it was the content of the articles, rather than the coverage itself, that resulted in litigation. Our results demonstrate that the media serves an important role in corporate accountability that both disincentivizes misconduct and holds firms accountable.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"5910 1","pages":"567 - 601"},"PeriodicalIF":0.0,"publicationDate":"2020-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84105237","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}
Researchers still know very little about the incentives of police. Using geocoded crime data and a novel source of within-city variation in punishment severity, I shed light on enforcement behavior. I find a 13 percent decrease in drug arrests in parts of a city where drug sale penalties were weakened. There is no displacement of nondrug offenses. If offenders are significantly deterred by harsher penalties, as the law intended and Becker’s model of criminal behavior predicts, drug arrests should increase in areas with weaker penalties. My results are therefore consistent with police officers treating enforcement effort and punishment severity as complements. I also find that citywide crime and drug use do not increase after the reform. I thus call into question the War on Drugs view of punishment and suggest that certain types of enforcement can be reduced without incurring large public safety costs.
{"title":"Crime and (a Preference for) Punishment: The Effects of Drug Policy Reform on Policing Activity","authors":"A. Soliman","doi":"10.1086/721292","DOIUrl":"https://doi.org/10.1086/721292","url":null,"abstract":"Researchers still know very little about the incentives of police. Using geocoded crime data and a novel source of within-city variation in punishment severity, I shed light on enforcement behavior. I find a 13 percent decrease in drug arrests in parts of a city where drug sale penalties were weakened. There is no displacement of nondrug offenses. If offenders are significantly deterred by harsher penalties, as the law intended and Becker’s model of criminal behavior predicts, drug arrests should increase in areas with weaker penalties. My results are therefore consistent with police officers treating enforcement effort and punishment severity as complements. I also find that citywide crime and drug use do not increase after the reform. I thus call into question the War on Drugs view of punishment and suggest that certain types of enforcement can be reduced without incurring large public safety costs.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"22 1","pages":"791 - 810"},"PeriodicalIF":0.0,"publicationDate":"2020-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73987137","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}
Airbnb, a prominent sharing-economy platform, offers dwellings for short-term rent. Despite restrictions, some sellers illegally offer their accommodations, taking advantage of a degree of anonymity proffered by the platform to hide from potential enforcement. We study the extent to which enforcement works in Manhattan, one of the most active short-term rental markets, by testing the effects of two recent enforcement events. We find a negative effect on the number of entire-home listings in Manhattan and positive effects on the prices and occupancies of remaining listings following each enforcement event, which suggests that some illegal listings are withdrawn from the market. We demonstrate evidence suggesting that a portion of withdrawn listings reenter the market under the less enforced listing category of private rooms.
{"title":"Platform, Anonymity, and Illegal Actors: Evidence of Whac-a-Mole Enforcement from Airbnb","authors":"Jian Jia,Liad Wagman","doi":"10.1086/709243","DOIUrl":"https://doi.org/10.1086/709243","url":null,"abstract":"Airbnb, a prominent sharing-economy platform, offers dwellings for short-term rent. Despite restrictions, some sellers illegally offer their accommodations, taking advantage of a degree of anonymity proffered by the platform to hide from potential enforcement. We study the extent to which enforcement works in Manhattan, one of the most active short-term rental markets, by testing the effects of two recent enforcement events. We find a negative effect on the number of entire-home listings in Manhattan and positive effects on the prices and occupancies of remaining listings following each enforcement event, which suggests that some illegal listings are withdrawn from the market. We demonstrate evidence suggesting that a portion of withdrawn listings reenter the market under the less enforced listing category of private rooms.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"16 6","pages":"729-761"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138510086","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}
Audra L. Boone, Brian J. Broughman, Antonio J. Macias
In this reply to Jetley and Huang’s note on arbitrage spread outliers, we present data showing that the analysis of target shareholders’ abnormal returns in our May 2019 article published in the Journal of Law and Economics is not materially impacted by outliers.
{"title":"Do Appraisal Challenges Benefit Target Shareholders through Narrowing Arbitrage Spread? A Reply","authors":"Audra L. Boone, Brian J. Broughman, Antonio J. Macias","doi":"10.1086/711667","DOIUrl":"https://doi.org/10.1086/711667","url":null,"abstract":"In this reply to Jetley and Huang’s note on arbitrage spread outliers, we present data showing that the analysis of target shareholders’ abnormal returns in our May 2019 article published in the Journal of Law and Economics is not materially impacted by outliers.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"94 1","pages":"817 - 820"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89800182","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 United States, every year roughly 600,000 people are released from prison, two-thirds of them without having served their full sentence behind bars. Yet little is known about how release before full completion of sentence affects recidivism. I exploit the distinction between sentence and time served in prison to better understand how custodial and noncustodial sanctions affect recidivism. In particular, I study the effects of time in prison and time on parole on recidivism. Relying on two instrumental variables that provide independent variation in sentence and time served in prison, I do not find evidence that parole time affects recidivism. However, I find that a month in prison results in a 1.12-percentage-point decrease in the probability that an individual will reoffend while on parole, but it appears to have no effect on overall reoffending.
{"title":"The Effects of Time in Prison and Time on Parole on Recidivism","authors":"Mariyana Zapryanova","doi":"10.1086/709585","DOIUrl":"https://doi.org/10.1086/709585","url":null,"abstract":"In the United States, every year roughly 600,000 people are released from prison, two-thirds of them without having served their full sentence behind bars. Yet little is known about how release before full completion of sentence affects recidivism. I exploit the distinction between sentence and time served in prison to better understand how custodial and noncustodial sanctions affect recidivism. In particular, I study the effects of time in prison and time on parole on recidivism. Relying on two instrumental variables that provide independent variation in sentence and time served in prison, I do not find evidence that parole time affects recidivism. However, I find that a month in prison results in a 1.12-percentage-point decrease in the probability that an individual will reoffend while on parole, but it appears to have no effect on overall reoffending.","PeriodicalId":22657,"journal":{"name":"The Journal of Law and Economics","volume":"232 1","pages":"699 - 727"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77250756","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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