Are M&A Lawyers Really Better Than Other Transactional Lawyers at Contract Drafting?

In a series of papers over the past decade, the three of us have studied extensively the persistence of obsolete terms in sovereign debt contracting. (e.g., here, here and here).  Our interest was motivated by a puzzling observation: Transactional lawyers did not appear to reform their contract clauses promptly in response to changes in the external environment.  In a market with multi-billion dollar transactions, and with some of the most elite law firms in the world, the slow pace of innovation was surprising.  It was especially surprising given the conventional view that good transactional lawyers keep abreast of … Read more

Revising Boilerplate in Private Equity and Public Company Contracts: Which Context is Stickier and Why?

Over the past half dozen years, the three of us have written a number of papers on sovereign bond contracts.  In the first set of papers, we documented the stickiness phenomenon (the reluctance of lawyers to modify standard contract language even though obsolescence posed a significant risk of misinterpretation). In the second set of papers, we studied the phenomenon of random mutations to the standard form language that occurred without an apparent rational purpose (here, here, and here). Both findings seemed completely at odds with the standard account of how sophisticated lawyers drafted multi-billion dollar financial … Read more

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

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 by “actively” enforcing their rights.  Activist investors pursue this strategy in markets in which the majority of investors are passive. Much of the discussion of this development in both the financial press and the academic literature has focused on activists acquiring equity positions in order to influence a firm’s management policies (see here and here). Our focus, however, is … Read more