Columbia Law School
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Finance & Economics
Opening the Black Box of Companies’ Capital Investment Process
In spite of intensive academic research on capital expenditure efficiency, how firms make investment decisions remains largely a black box. We analyze that process by dividing it into two stages: budgeting of capital expenditures (CapEx) and execution of the budget. …
The Future of Data Driven Finance: Financial Regulation, Data Regulation, and RegTech
Fifty years ago, banking was a relationship business. Bank managers collected information about depositors and borrowers from all sorts of sources, formal and informal. In recent decades, credit decisions have become far more data-driven, with companies like Amazon and the …
Arnold & Porter Discusses Bill on Banking Services for Marijuana-Related Firms
Depository institutions have been understandably reluctant to provide banking services to cannabis-related businesses in light of the significant (and costly) regulatory and compliance expectations that apply under the Bank Secrecy Act (BSA) and other anti-money laundering (AML) laws and regulations.…
The Social Functions of the Stock Market: A Primer
A stock market is a key feature found in any economy with a substantial private sector. For example, in the United States, we see the New York Stock Exchange and Nasdaq, in the U.K, the London Stock Exchange, and in …
Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis
Investment expenditure in Europe collapsed in the aftermath of the 2008 global financial crisis. This collapse followed a boom during which the corporate sector borrowed heavily (Gopinath, Kalemli-Ozcan, Karabarbounis, Villegas-Sanchez, 2017). Figures 1 and 2 illustrate the extent of the …
How U.S. Tax Inversions Affect Shareholder Wealth
The United States had one of the world’s highest tax rates – around 35 percent – prior to the Tax Cuts and Jobs Act of 2017 (TCJA 2017, and especially the Global Intangible Low-Taxed Income (GILTI) rules in new tax …
What Do Mutual Fund Investors Really Care About?
Do investors behave rationally? Many researchers examine actively managed mutual funds to answer this question. The advantage of doing so setting is that we can observe the past performance of fund managers as well as the capital allocation decisions of …
How an Issuer’s Multiple Credit Ratings Can Affect Its IPO
While the list of prospective issuers with credit ratings is lengthy, literature is sparse on how ratings from multiple credit rating agencies (CRAs) affect the performance of a company’s initial public offering (IPO). Our research is motivated by the lack …
The New Business Rule and Compensation for Lost Profits
Not so long ago, most American jurisdictions followed the “new business rule.” If a business did not have a history of profitable operations, it would have been denied recovery for lost profits. That has changed. The prevailing wisdom nowadays replaced …
How Banks with Leaders Experienced in Past Crises Fared in Global Financial Crisis
Regulators and policymakers have asserted that the public was “blindsided” by the “perfect storm” that caused the 2007-2009 global financial crisis (GFC, e.g., Financial Crisis Inquiry Commission [FCIC] 2011; Appelbaum 2015). Academic research has similarly found that market participants, including …
Corporate Governance and Crowdfunding
In a recent paper, we focus on the expected agency problems in equity crowdfunding markets and the governance mechanisms that might mitigate them.
In equity crowdfunding, there are two pronounced problems that result from significant information asymmetry associated with small …
Cleary Gottlieb Discusses FSOC Proposal to Change SIFI Designation Process
On March 6, 2019, the Financial Stability Oversight Council (“FSOC”) issued new proposed guidance (the “Proposal”) regarding the designation of nonbank financial companies as “systemically important financial institutions” (“SIFIs”).[1] The Proposal makes substantial …
Debevoise & Plimpton Discusses the Rise of Secured Bonds in M&A Deals
Early 2019 has seen a wave of issuances of secured bonds to finance large acquisitions. The likelihood of slower rate increases by the Fed has led to an uptick in investor demand for secured bonds while making the pricing on …
Disruption and the Credit Markets
In the past 30 years, defaults on corporate bonds have been substantially higher than the historical average. Dividing the years from 1970 to 2016 into two equal periods, the default rate of U.S. corporate bonds rose from 0.12 percent to …
Billionaire Taxes
U.S. Senator Elizabeth Warren recently proposed an ultra-high-net worth tax that would raise hundreds of billions of dollars in revenue per year while taking no money from 99.9 percent of U.S. households. Warren would annually tax household fortunes above $50 …
Debevoise & Plimpton Discusses Responsible Investment as an Opportunity for European Funds
European private equity fund managers are well aware that demonstrating a commitment to responsible investment is becoming an essential component of a smooth and successful fundraising. Regulation is only one of the drivers for that change, but it is an …
Making Consumer Finance Work
In early 2009, with the financial crisis still raging, progressive policymakers passed legislation upending the credit card industry. This legislation precluded card issuers from changing interest rates without sufficient warning or charging exorbitant late fees. Congresswoman Carolyn Maloney, who sponsored …
Enforcing Preliminary Agreements
Contract formation in commercial transactions can be an expensive and intricate process involving multiple stages and players, as well as significant investments in expertise and information. In complex asset purchases, leases, corporate acquisitions, or venture financing transactions, to name just …
Double Trouble: An Analysis of IRS Attention and Financial Reporting
Existing research provides limited insight into what draws the attention of tax authorities to public information and how that information is used in the process of examining corporate tax positions. For publicly traded firms in the U.S., the Internal Revenue …