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

The SEC’s Shift to Administrative Proceedings: An Empirical Assessment

Congress expanded the SEC’s ability to pursue enforcement actions in administrative proceedings in the Dodd Frank Act, bringing the agency’s use of proceedings before its own administrative law judges (ALJs) into the spotlight. A number of respondents have challenged the constitutionality of these proceedings, relying principally on arguments arising out of the Appointments Clause of the Constitution. Those disputes are currently being played out both before the SEC and in the courts, but they are unlikely to be a long-term obstacle to the SEC’s use of administrative proceedings.

In our article, The SEC’s Shift to Administrative Proceedings: An Empirical AssessmentRead more

Piling on? An Empirical Study of Parallel Derivative Suits

When it comes to corporate litigation, is more necessarily better? The legal system has developed a broad array of litigation options to address corporate wrongdoing. Under state law, shareholders can file a derivative suit or class action alleging that directors and officers breached their fiduciary duty. Under federal law, shareholders can file a securities class actions alleging that the directors and officers misled the market. These private lawsuits are often filed alongside government enforcement actions brought by the Securities & Exchange Commission, the Department of Justice, or state regulators.

In our article, Piling On: An Empirical Study of Parallel Derivative Read more