Columbia Law School
Sky Blog
Risk
Dodd-Frank Stress Tests Are Fine, but We Need a Cybersecurity Stress Test, Too
Last week, news emerged that China had hacked the FDIC on several occasions during the past few years. This revelation renews concerns about the security of America’s financial institutions and comes on the heels of the third bank hacking through …
Disciplining Corporate Boards and Debtholders Through Targeted Proxy Access
Corporate directors inevitably must make real-time decisions on complex and nuanced matters that impact not only the company, but also the company’s various stakeholders—e.g., shareholders, creditors, and employees. The pressure cooker that often is the corporate boardroom is not for …
Private Offerings and Public Ends: Reconsidering the Regime for Classification of Investors Under the Securities Act of 1933
To achieve a growing number of public, social, civic goals, we draw on the power of financial markets. Parents who can afford to save for the cost of their children’s college education rely on the market when they put money …
PwC discusses Five Key Points from Basel’s Proposed Restrictions on Internal Models for Credit Risk
Last week, the Basel Committee on Banking Supervision (Basel) proposed floors and other constraints on the use of internal models for calculating credit risk capital. The proposal aims to reduce complexity and variation in the calculation of regulatory capital among …
The Threat of Hedge Fund Activism Disciplines Managers and Benefits Shareholders. But What Happens to Creditors?
Hedge fund activism is the latest rave in corporate governance. Activist hedge funds build stakes in target firms in order to press management for various changes. When managers are uncooperative, they may just be forced to step down. Lest you …
Financial Distress Risk in Initial Public Offerings: How Much Do Venture Capitalists Matter?
On January 7th 2016, Thomson Reuters and the National Venture Capital Association (NVCA) published their Exit Poll Report, which stated that in the U.S. 77 venture capital (VC)-backed initial public offerings (IPOs) raised $9.4 billion in 2015. Over …
CEO’s Inside Debt and Dynamics of Capital Structure
A widely-held view in financial economics is that CEOs holding a non-diversified wealth portfolio tied to the firm are likely to be more risk-averse when making corporate decisions than what diversified shareholders would prefer. To reduce this divergence in attitude …
The History of Hedge Fund Regulation in the United States
The hedge fund industry in the United States has evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets today. Hedge funds in the United States were originally privately-held, privately-managed investment …
Re-Examining the Business Judgment Rule from a Comparative Perspective: Is it Really in the Shareholders’ Interest?
One of the most remarkable features of US corporate law–at least, from the perspective of a foreign scholar–is the power given to the board of directors. Under current US corporate law (especially, in Delaware), the authority of the board of …
The Association Between Corporate General Counsel and Firm Credit Risk
The role of the corporate general counsel (GC) has evolved over the past several decades. Traditionally, the GC served as an internal monitor via his/her gatekeeping functions to ensure that firms and their personnel acted legally and responsibly in business …
PwC discusses Ten Key Points from Basel’s Fundamental Review of the Trading Book
On January 14th, the Basel Committee on Banking Supervision (BCBS) published its revised capital requirements for market risk. The final standard, also known as the Fundamental Review of the Trading Book (FRTB), is intended to harmonize the treatment …
What Doesn’t Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior
During most of Steve Job’s tenure as CEO of Apple Inc. the company did not have any long-term debt obligations. Apple started an aggressive buyback program only after Tim Cook took over, at the same time that it added debt …
Securitisation and Post-Crisis Financial Regulation
There are few types of debt as internationally issued and traded as the debt securities issued in securitisation (in the United States, spelled securitization) transactions. European investors commonly invest in securities issued in U.S. securitisation transactions, and vice versa.
It …
The Way We Pay Now
The last decade has seen a dramatic shift away from stock options and in favor of performance-based equity or “performance shares” in senior executive packages at large US public companies. Once accounting for over 60% of ex ante executive pay …
Board Oversight of Risk Culture: Are U.S. Boards Willing and Able to Meet the Escalating Expectations?
Over the past 15 years expectations for board risk oversight have skyrocketed. In 2002 the Sarbanes-Oxley Act put the spotlight on board oversight of financial reporting. The 2008 global financial crisis focused regulatory attention on the need to improve board …
Do Women Stay Out of Trouble? Evidence from Corporate Litigation
An estimate by John B. Henry in the Metropolitan Corporate Counsel (February 2008, p. 28) suggests that the annual direct litigation cost of Fortune 500 companies was a whopping $210 billion in 2006, i.e., about one-third of their after-tax profits …
PwC discusses Cyber-security: Think Risk Not IT
Despite millions of dollars spent on enhancements, cybersecurity remains the area of risk management with the largest gap between threat and preparedness. As the frequency and sophistication of cyber attacks have increased significantly in recent years, counter measures have failed …
The Role of Risk Management in European Banking Integration
Europe is now engaged in an experiment unprecedented in world history: can independent nations – even if linked by significant legal, economic, and social ties – merge their financial systems into a true banking union? Policymakers are working diligently to …
Ring-Fencing: Functions and Conceptual Foundations
“Ring-fencing” is often touted as a potential regulatory solution to problems in banking, finance, public utilities, and insurance. However, both the precise meaning of ring-fencing, as well as the nature of the problems that ring-fencing regulation purports to solve, are …