August 2018

How Patents’ Disclosure Role Can Ease Market Uncertainty

By Ali Mohammadi, Mehdi Beyhaghi and Pooyan Khashabi August 31, 2018 by renholding

In addition to providing legal protection, patents serve a disclosure function aimed chiefly at inventors and technology customers. However, the effect of this disclosure on capital markets has been left largely unexamined in the literature, creating a gap in understanding …

How Markets Learn to Value the Financial Performance of Socially Responsible Firms

By Zhichuan Frank Li, Jun Wang and Chong Yu August 30, 2018 by renholding

Market reactions to a company’s performance on environmental and other social issues are ambiguous, because it is difficult to measure social and financial performance and how they affect each other. We, however, create a virtual value-weighted portfolio based on the …

SEC Chair Clayton Talks Capital Formation

By Jay Clayton August 30, 2018 by renholding

I am delighted to participate in the 36|86 Entrepreneurship Festival here in Nashville, Tennessee. I would like to speak for about 25 minutes about key capital formation initiatives at the SEC.[1] After my remarks, I will be joined by

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Buy-Side Analysts and Earnings Conference Calls

By Michael J. Jung, M.H. Franco Wong and X. Frank Zhang August 29, 2018 by renholding

The role of sell-side equity analysts in the capital markets has been researched extensively by academics over the past several decades. In contrast, due to data limitations, there has been little research on buy-side analysts. Buy-side analysts work for institutional …

Introducing the Totally Unnecessary Benefit LLC

By Mohsen Manesh August 28, 2018 by renholding

The rapid proliferation of state statutes authorizing so-called “benefit” corporations—starting with Maryland in 2010 and spreading to over 30 states by 2018—has been premised in large part on the assertion that conventional corporate law mandates shareholder primacy. Under this legal …

Our Experts Respond to President Trump on Securities Regulation

By Reynolds Holding August 27, 2018 by renholding

The CLS Blue Sky Blog seeks to focus on current events, and the president has given us an opportunity. He has suggested a shift from a quarterly to a six-month reporting cycle. How would this proposal affect the cost of …

What Really Drives “Short-Termism”?

By John C. Coffee, Jr. August 27, 2018 by renholding

Earlier this month, the CEO of Pepsi Co. suggested to President Trump that eliminating quarterly reporting (and shifting to biannual reporting) would reduce the pressure on managers to focus on the short-term. As impulsive as Elon Musk, the president bought …

Thinking Holistically Before Dropping Quarterly Reporting

By James D. Cox August 27, 2018 by renholding

Robust capital markets are widely believed to signal economic vitality, and a reliable barometer of such vitality was historically a rising number of IPOs and listings.  Yet, as we are experiencing record setting economic expansion, that barometer has failed us.  …

Financial Reporting Frequency

By Donald C. Langevoort August 27, 2018 by renholding

I should be a prime candidate to support the lengthening of the financial reporting cycle from three to six months, as the White House—and many others—now say they want the SEC to do.  I want public corporations to be more …

Quarterly Reporting and Market Liquidity

By Joshua R. Mitts August 27, 2018 by renholding

Trading in U.S. equity markets is fast and cheap.  While proponents of ending quarterly reporting point to the dangers of short-termism, less frequent disclosure is also likely to lead to a decline in liquidity and to greater trading costs.  The …

Cutting Disclosure Frequency Is the Wrong Solution to the Wrong Problem

By Charles K. Whitehead August 27, 2018 by renholding

President Trump has directed the Securities and Exchange Commission to study whether a public company’s reporting requirements should shift from a quarterly to semi-annual schedule.  Doing so, according to the president, “would make business (jobs) even better in the U.S.” …

How Vulnerable Are U.S. Banks to Commercial Real Estate?

By Jonathon Adams-Kane August 24, 2018 by renholding

Commercial real estate (CRE) lending is a risky activity that still dominates the business model of many modestly capitalized small and medium-sized banks. Bank supervisory and regulatory reforms recently enacted have reflected some of the lessons from the Great Financial …

Corporate Governance—The New Paradigm—A Better Way Than Federalization

By Martin Lipton August 24, 2018 by renholding

While “The Accountable Capitalism Act” introduced on August 15 by Senator Elizabeth Warren contains several very worthwhile provisions, it is premised on the federalization of all public corporations with revenues in excess of $1 billion. Mandatory federal incorporation and the …

Voluntary Disclosure and Firm Visibility: Evidence from Initial Public Offerings

By Michael Dambra, Bryce Schonberger and Charles Wasley August 23, 2018 by renholding

Legal academics and practitioners have long emphasized the important role that disclosure plays in the initial public offering (IPO) process. Issuers and their underwriters provide information via a prospectus and corresponding IPO roadshow to mitigate the information gap between the …

SEC Chair Talks Investor Roundtables on Conduct Standards for Investment Professionals Rulemaking

By Jay Clayton August 23, 2018 by renholding

In April 2018, the Commission proposed for public comment a significant rulemaking package designed to serve our Main Street investors that would (1) require broker-dealers to act in the best interest of their retail customers, (2) reaffirm and in some

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What Happened to “Meaningfully Close Personal Relationship” in Insider Trading?

By Peter Henning August 22, 2018 by renholding

Did insider trading law almost devolve into an effort to define  what kind of relationship a tipper and tippee must have for  a defendant to be liable? And was any federal judge or jury qualified to say? Since the Second …

Cahill Discusses Amendments to Delaware Limited Liability Company Act

By Helene R. Banks, Bradley J. Bondi, Charles A. Gilman, Geoffrey E. Liebmann and Kaitlyn Pasco August 22, 2018 by renholding

Amendments to the Delaware Limited Liability Company Act (the “DLLCA”) previously introduced in April 2018 were signed into law on July 24, 2018[1]. The amendments enable a Delaware limited liability company (an “LLC”) to engage in several new …

How the Level of Blame Affects Companies’ Willingness to Disclose

By Jason D. Schloetzer, AyungTseng, Teri Lombardi Yohn and Yeo Sang Yoon August 21, 2018 by renholding

What motivates a firm to disclose information rather than remain silent following a material, negative economic event? For example, why did oil companies issue multiple, detailed disclosures about oil spills caused by Hurricane Katrina and Hurricane Rita but not disclose …

Latham & Watkins Discusses How New Foreign-Investment Law Changes CFIUS Review

By Steven P. Croley, Les P. Carnegie, Edward J. Shapiro, David M. Blumental and Jana K. Dammann de Chapto August 21, 2018 by renholding

New legislation to reform review of foreign direct investment in the United States — the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) — has just been signed into law. FIRRMA will bring significant changes to the framework according …

Hidden Holdouts and the Puzzling Pricing of Collective Rights: An Analysis of the Venezuelan Debt Crisis

By Robert E. Scott, G. Mitu Gulati and Stephen J. Choi August 20, 2018 by renholding

The emergence of “activist” investors across a range of markets has been one of the most interesting phenomena of the past few decades (see here, here and here). These investment funds seek to capture rents from their investments …