Sky Blog
It is well known that banks play an important role in monitoring borrowing firms (e.g., Diamond, 1984). Yet, how banks choose among alternative mechanisms that reduce agency costs with borrowers is not completely understood. In our paper, “Bank Relations and …
The separation of corporate ownership from control leads to an agency problem caused by the divergent interests of shareholders (the principals) and management (the agent). One area of contention is the level of risk-taking by the firm. Managers’ investment in …
Research has begun to analyze the tone and narrative structure of earnings announcements after decades of focusing on market reactions to the earnings news itself. One conclusion from this literature is that language matters – the tone (i.e., the excess …
Directors of regulated financial institutions have exceedingly difficult jobs with many demands. The aftermath of the financial crisis led to countless new regulatory requirements and expectations, many of these unwritten and evolving based on political currents or varying views at …
An important feature of U.S. corporate law is regulatory competition among various states. Unlike firms in other industrialized countries, American corporations can choose to incorporate in any state, even if they do not do business there. A large body of …
Every securities lawyer knows that offers and sales of securities must either be registered under the Securities Act of 1933 (Securities Act) or made pursuant to an applicable exemption. This rule is so fundamental that we often neglect to think …
Corporate planners and practitioners know well that it takes quite a long time to close a long-form merger, with the shareholder approval requirement accounting for the bulk of the delay in almost half of such mergers. But we have not …
Corporate law and governance are complex and continually changing. Yet, broadly speaking, throughout the 20th century corporate law developed with a focus on the allocation of power between shareholders and boards of directors. And, notwithstanding significant ambiguity and dissent, …
Companies that go public with multiple classes of shares will be excluded from the major U.S. stock indexes of S&P Dow Jones Indices, the organization announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies …
The degree to which business participants ought to be free to limit or eliminate fiduciary duties and associated liabilities remains a hotly contested matter in many jurisdictions. In a new chapter forthcoming in Edward Elgar’s Research Handbook on Fiduciary Law…
A central goal of corporate law is to make managers accountable to shareholders. So it may come as a surprise that America’s federal government frequently compels companies to “effectively exclude the Shareholder from . . . influence over the Corporation’s …
In July 2017, Dow Jones, goaded by the reaction to Snapchat having gone public with a class of shares without voting rights, announced that, after extensive consultation, it had decided to henceforth eliminate companies with dual-class shares from its …
On July 17, SEC Commissioner Michael Piwowar extended an important invitation to U.S. public companies. “For shareholder lawsuits,” Piwowar offered, “companies can come to [the SEC] to ask for relief to put… mandatory arbitration into their charters.” To some, this …
Few research topics over the last two decades have proven as alluring and elusive as corporate governance. Its allure is self-evident: Since the turn of the 21st century, a growing number of pundits, commentators, and scholars have argued that high …
In the past few years, investors have begun to embrace the reality that academics have been championing for decades—that a broad-based passive indexing strategy is superior to picking individual stocks or actively managed mutual funds. As a result, millions of …
It has been well documented that in the U.S. and other countries with developed stock markets, sound public disclosure practices strengthen the reputation and credibility of firms. However, it’s unclear whether good disclosure practices are also beneficial in emerging markets …
Professor Lucian Bebchuk has engaged in two rounds of law-review-article duels with Professor Martijn Cremers and Professor Simone Sepe over classified boards. The weapons were statistics (and common sense). Cremers and Sepe wore the classified-board-stakeholder colors; Bebchuk, the agency-model-shareholder-democracy colors. …
With trillions of dollars in assets, sovereign wealth funds (SWFs) play a major role in financial markets around the world. With billions (and perhaps trillions) of dollars’ worth of equity investments around the world, the investment behavior of SWFs is …
Previous research on shareholder voting has placed most of the emphasis on the role of institutional shareholders. In our recent study, however, we provide evidence that managers strategically rely on the support offered by retail shareholders to ensure that their …
The news media are an important source of information for the U.S. capital markets, especially when drawing attention to questionable behavior of corporate executives. Coverage can, however, pressure companies into making dubious financial decisions like emphasizing short-term earnings over long-term …