Elite Law Firms Cash in on Market Knowledge

The legal advisory market for major corporate transactions is dominated by a relatively small number of elite law firms.  What value do these law firms provide?  Regulatory expertise, innovative drafting, speed of execution, and reputational cachet have all been offered as likely candidates. In Market Information and the Elite Law Firm, I argue that a considerable share of the profits earned by these firms also derives from selling their information about current “market” transaction terms.

Indeed, corporate transactions such as mergers and acquisitions or financings are characterized by several salient facts that lack a complete theoretical account. First, they … Read more

The Last Days of Stock Exchange Listings for Sovereign Debt?

On October 25, 2016, the Argentine province of Santa Fe issued $250 million in international bonds. One aspect of this offering is highly unusual for international sovereign debt: the bonds are not listed on any of the major global stock exchanges.

Such offerings are almost always listed, and usually on the Luxembourg Stock Exchange. Why did Santa Fe decide to stray from the herd? Perhaps it realized that there was little value to be gained from listing on an exchange.

In our recent paper, “The Sovereign-Debt Listing Puzzle,” we investigate what purpose is served by listing sovereign bonds … Read more

Law Firm Selection and the Value of Transactional Lawyering

Transactional lawyers have been variously described as transaction-cost engineers, reputational intermediaries, and regulatory experts. In Law Firm Selection and the Value of Transactional Lawyering, I argue that, within elite law firms, transactional lawyers also serve to aggregate market information. Law firms with high-volume transactional practices acquire private information about the set of value-increasing deal terms for certain transaction types and the pricing of those terms. Repeat-player law firms can thus help their clients value such terms more accurately, giving them a significant bargaining advantage in deal negotiations.

This informational role played by elite law firms arises as follows. Although … Read more