Shadow Trading, Corporate Investments, and Macroeconomic Risk

By Yoon-Ho Alex Lee, Lawrence Liu and Sandro Romano March 22, 2023 by renholding

Corporate insiders engage in “shadow trading” when they use private information about their own firm to trade in the shares of economically connected companies such as suppliers, customers, or competitors. While legal scholars have long recognized that shadow trading can …

Public Information and Capital Flows: Evidence from a Betting Market

By Karthik Balakrishnan and Darren Bernard September 2, 2021 by renholding

What are the consequences of increasing public information in a market of risk-seeking participants? Academics and policy makers alike are grappling with this question following the influx of speculative capital flows from individual investors in financial markets. As platforms such …

Do Fiduciary Duties Matter?

By A. Joseph Warburton August 13, 2019 by renholding

Do fiduciary responsibilities have any effect on the behavior of firm insiders? In a series of studies, I find empirical evidence that stronger fiduciary duties reduce managerial risk taking. And that is not all. The evidence indicates that stronger fiduciary …

Institutional Shareholders: Friends or Foes of Banks?

By Emmanuel T. De George, Nayana Reiter, Christina Synn and Christopher D. Williams August 9, 2019 by renholding

Following the financial crisis, regulators, academics, and practitioners investigated the factors that contributed to the systemic failure of the financial system. An important dimension of systemic risk that was identified is the correlated movements in market prices among banks during …

Is the Cost of Equity Greater than the Risk-Free Rate?

By J.B. Heaton August 8, 2019 by renholding

As a matter of abstract financial-economic theory, the cost of equity is straightforward. It is the minimum expected return investors require to hold the firm’s equity at the current price. Financial economists may disagree on the best way to estimate …

The Social Functions of the Stock Market: A Primer

By Merritt B. Fox April 12, 2019 by renholding

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 …

SEC’s Corporate Finance Director Discusses Disclosing Risks

By William Hinman March 21, 2019 by renholding

Today, I would like to discuss [1] how the U.S. securities disclosure requirements, which are largely principles-based, apply in areas where the disclosure topics may be complex, associated with uncertain risks and rapidly evolving. Sounds like Brexit might fit that

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What Can We Learn from Stock Prices?

By Joshua Mitts December 18, 2018 by renholding

Prices convey information. Hayek (1945) put it this way: Prices “coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.” Stock prices, in particular, matter a …

Skadden Discusses Merger Reviews and Antitrust Inquiries in Case of “No-Deal” Brexit

By Bill Batchelor, Frederic Depoortere, Giorgio Motta and Ingrid Vandenborre November 1, 2018 by renholding

As the U.K.’s March 29, 2019, exit date from the European Union approaches, companies involved in merger reviews or antitrust investigations should pre-emptively address the risk of a “no-deal” Brexit.

Both the U.K. and EU have antitrust laws that can …

SEC Commissioner Jackson on Re-Opening Comment Period for Security-Based Swap Dealer Rules

By Robert J. Jackson, Jr. October 12, 2018 by renholding

Thank you, Mr. Chairman, and thank you to my colleague Commissioner Peirce and the terrific Staff in the Division of Trading and Markets for all of the hard work that so clearly went into this proposal. I’m especially grateful to

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Latham & Watkins Discusses Principles Guiding FINRA Enforcement Action

By John J. Sikora, Jr., Stephen P. Wink and Gregory Mortenson September 27, 2018 by renholding

The Financial Industry Regulatory Authority (FINRA) relies on a framework of core principles in deciding whether to bring an Enforcement action in response to a given set of facts, and the key consideration is an assessment of “risk.” These core …

Corporate Governance Reform in Post-Crisis Financial Firms: Two Fundamental Tensions

By Christopher M. Bruner September 5, 2018 by renholding

The manner in which financial firms are governed directly affects the stability and sustainability of both the financial sector and the “real” economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue …

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 …

The Role of Artificial Intelligence and Machine Learning in Risk Management

By Saqib Aziz and Michael Dowling August 10, 2018 by renholding

Lending in China is a risky proposition. When a U.S. bank needs to decide whether to approve a loan to a U.S. customer, it simply accesses the customer’s credit report, which is often the deciding factor. The bank can thus …

Cleary Gottlieb Discusses New Law Revising Dodd-Frank Act

By Derek M. Bush, Hugh C. Conroy Jr., Allison H. Breault, Zachary L. Baum and Rebecca F. Green May 30, 2018 by renholding

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which became law on May 24, contains the first major package of revisions to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act …

Wachtell Lipton Discusses Risk Management and the Board of Directors

By Martin Lipton, Wayne M. Carlin, Daniel A. Neff, Sabastian V. Niles and Andrew R. Brownstein April 4, 2018 by Carly Goeman

The past year has seen continued evolution in the political, legal and economic arenas as technological change accelerates. Innovation, new business models, dealmaking and rapidly evolving technologies are transforming competitive and industry landscapes and impacting companies’ strategic plans and prospects …

How CEOs’ Personal Finances Affect Their Companies’ Financial Decisions

By Timo P. Korkeamaki, Eva Liljeblom and Daniel Pasternack April 3, 2018 by renholding

A number of recent studies have focused on how the behavior of chief executives affects their firms’ financial decisions. We contribute to this literature by looking at the connections between CEOs’ personal finances and those of their firms. Unique data …

Debevoise Discusses the New SEC Cybersecurity Guidance

By Luke Dembosky, Jeremy Feigelson, Matthew E. Kaplan, Jim Pastore and Paul M. Rodel March 26, 2018 by renholding

On February 21, 2018, the SEC issued new Guidance regarding cybersecurity disclosure and governance requirements applicable to SEC reporting companies. In our earlier Client Update on this topic, we discussed the disclosure considerations addressed in the Guidance. In this Client …

VUCA and the Management of Legal Risk

By Robert C. Bird March 15, 2018 by renholding

VUCA is an acronym for volatility, uncertainty, complexity, and ambiguity – four dimensions of risk – and a tool that can used to better manage legal risk. Designed by the U.S. military and reinforced by business,[1] it describes an …

Wachtell Lipton Offers Thoughts for Boards of Directors in 2018

By Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles, Vishal Chanani and Kathleen C. Iannone December 5, 2017 by renholding

As 2017 draws to a conclusion and we reflect on the evolution of corporate governance since the turn of the millennium, a recurring question percolating in boardrooms and among shareholders and other stakeholders, academics and politicians is: what’s next on …

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