Stephen Davidoff Solomon recently detailed the best deals of 2014 in an article titled “Grading Success and Failure in a Year of Prominent Deals,” which explores the most notable collaborations, transactions, and decisions made by various companies in 2014.
Ken Taymor recently co-authored a paper titled “Biosimilars And The European Experience: Implications For The United States,” which looks to the European experience with biosimilars to inform how the US biosimilars market will develop once the FDA acts.
Profs. Robert Bartlett and Justin McCrary recently wrote “Shall We Haggle in Pennies at the Speed of Light or in Nickels in the Dark?,” which demonstrates how recent proposals to modify the penny-based system of stock trading may have simultaneous and opposite effects on the incidence of high frequency trading and the trading of undisplayed, or “dark”, liquidity.
Prof. Aaron Edlin recently released a new research
paper titled “Acivating Actavis,” which provides an in-depth analysis of
the Supreme Court’s recent decision in FTC v. Actavis. You can download
the paper here.
Prof. David Gamage writes that key reforms are needed to prevent the Affordable Care Act from hurting low- and moderate-income workers. If not, he says businesses may shift some full-time workers to part-time and cut their salaries to circumvent the employer mandates.
In “Regulating Capital,” Prasad Krishnamurthy proposes a framework for the regulation of capital in systemically important financial institutions (SIFIs) that represents a substantial departure from current regulatory practice.
Aaron Edlin recently posted “The Role of Switching Costs in Antitrust Analysis: A Comparison of Microsoft and Google.”
This analysis, co-authored by Robert Harris, addresses the common
perception that Google’s current market position and conduct is
comparable to Microsoft’s prior to the antitrust action brought against
it by the Department of Justice in 1998.
In “Freedom to Trade and the Competitive Process,” Aaron Edlin and co-author Joseph Farrell explore the idea that the competitive process is the
process of sellers and buyers forming improving coalitions. Much of
antitrust can be seen as prohibiting firms’ attempts to restrain
improving trade between their rivals and customers. In this way,
antitrust protects firms’ and customers’ freedom to trade to their
Eric Talley presents an overview of the theoretical law and economics literature on the burden of proof within tort law and offers recommendations for further research in “Law, Economics, and the Burden of Proof.”
In “Do Institutional Investors Value the 10b-5 Private Right of Action? Evidence from Investor Trading Behavior Following Morrison v. National Australia Bank Ltd.,” Robert Bartlett, using an abrupt change in U.S. securities law, examines the value institutional investors place on the private right of action under Rule 10b-5 of the Securities Exchange Act of 1934.
In “Banking Market Integration and Firm Growth,” Prasad Krishnamurthy shows that banking market integration lowers the sensitivity of firm growth to local credit supply, which suggests that local credit constraints play an important role in amplifying economic volatility.
Eric Talley recently wrote “Corporate Form and Social Entrepreneurship: A Status Report for California (and Beyond)” in which he examines reforms in California creating corporate forms designed around for-profit entities wishing to serve broader social purposes. He also calls for the production of infrastructure to collect and analyze data on these new corporate forms.
Stavros Gadinis recently wrote “From Independence to Politics in Financial Regulation.” Gadinis’ work focuses on the intersections between finance
and government regulation. This paper takes a global look at
how governments reformed their “independent” financial regulatory
agencies by making them more politically accountable after the 2007-08
In “Can Company Disclosures Discipline State-Appointed Managers? Evidence from Greek Privatization,” Stavros Gadinis explores whether privatization reduces political favoritism, as predicted by conventional economic theory, using Greece as his case study.
In “General Equilibrium Effects of Prison on Crime: Evidence from International Comparisons,” Justin McCrary and co-author Sarath Sanga compare crime and incarceration rates for various countries. They find that, despite a five-fold increase in the incarceration rate in the U.S., there is no evidence of large improvements in safety.
The Affordable Care Act (ACA) has been heralded as the
signature achievement of the Obama Administration. While
recognizing the importance of the reform, David Gamage‘s essay focuses on
how the ACA’s tax provisions may also create perverse incentives
harming low- and moderate-income workers.
In “From Independence to Politics in Banking Regulation,” Stavros Gadinis discusses how US financial regulation traditionally relied on
independent agencies, such as the Federal Reserve
and the FDIC. This paper studies
reforms in 10 key jurisdictions for international
In the essay “On Tax Increase Limitations: Part I – A Costly Incoherence,” David Gamage
and co-author Darien Shanske explore the theoretical implications of
one particular type of fiscal limitation on state legislatures – namely,
special rules for tax increase limitations (TILs) – and whether these
are analytically sound.
“Don’t Tax the Rich, Tax Inequality.” Insightful analysis by Aaron Edlin and co-author Ian Ayres.
This work addresses inequality as a tangible and imminent threat to
modern society. Edlin and Ayres believe we have reached a tipping point, and propose a plan for Congress to reform the tax code to put the brakes on further growth in inequality.
In his new book: “Justifying Intellectual Property,” Robert Merges makes an ethical case for IP, arguing that these rights have deeper roots than economic efficiency alone.
Alan J.Auerbach published “Long-Term Fiscal Sustainability in Major Economies.” As the
world economy slowly recovers from the very deep and widespread
recession of recent years, many countries confront very serious fiscal
imbalances. How much time they have to deal with these imbalances is a
How should government research subsidies be allocated: What percentage should go to commercial firms and how much to academia? Should the law protect knowledge created by university research? In a paper presented to the American Economic Association, Suzanne Scotchmer suggests a mix of subsidies that would enable university researchers to focus on ideas, while for-profits focus on innovations.
Eric Talley and co-authors Antonio E. Bernardo and Ivo Welch published “A Model of Optimal Corporate Bailouts.” This paper analyzes incentive-efficient government bailouts within a canonical model of intra-firm moral hazard. Bailouts exacerbate the moral hazard of firms and managers in two ways. First, they make them less averse to failing. Second, the taxes to fund bailouts dampen their incentives. Nevertheless, if third-party externalities from keeping the firm alive are strong, bailouts can improve welfare. This model suggests that governments should use bailouts sparingly, where social externalities are large and subsidies small; eliminate incumbent owners and managers to improve a priori incentives; and finance bailouts through redistributive taxes on productive firms instead of forcing recipients to repay in the future.
Robert Bartlett and co-author Victoria Plaut published “Blind Consent? A Social Psychological Investigation of Non-Readership of Click-Through Agreements.” Consumers typically don’t read form contracts which often contain hidden traps. The result can be catastrophic, personally and systemically, as the subprime mortgage crisis demonstrated. Their article tackles this issue within a notorious domain, internet click-through agreements, and suggests ways to increase readership so consumers can avoid contract pitfalls.
Securitization — the combination of a group mortgages into a package, interests in which are sold on public and private securities markets — is a cornerstone of the financing structure for the American housing market. The collapse of this residential mortgage securitization market was a fundamental contributor to our continuing economic crisis. In their paper, “The End of Mortgage Securitization? Electronic Registration as a Threat to Bankruptcy Remoteness,” John Hunt, Richard Stanton and Nancy Wallace discuss a previously overlooked threat to the stability and continued operation of the market for securitized housing mortgages. The recently created and little known “Mortgage Electronic Registration Systems, Inc.”, or MERS, has ownership of over 60 million mortgages that secure trillions of dollars in homeowner debt. Hunt, Stanton and Wallace’s paper describes how the MERS structure and operation may create unforeseen risks for investors in mortgage-backed securities and how that risk may be mitigated.
Robert Bartlett presented “Making Banks Transparent” at The University of Pennsylvania Wharton School’s Conference on International Financial Regulation.
Eric Talley participated in the “Seminar on Testing Contracts,” organized in Krakow, Poland by the Max Planck Institute and the University of Bonn. At the meeting, Eric presented his most recent paper, The Measure of a MAC: A Quasi-Experimental Protocol for Tokenizing Force Majeure Clauses in M&A Agreements (co-author, Drew O’Kane). The paper describes a new software platform for large-scale quantitative textual analysis of transactional legal documents that Talley and O’Kane developed and the results of their first use of this new tool to analyze material adverse change clauses in merger agreements. Potential applications of their program includes allowing practitioners to better identify trends in deal document terms, facilitating regulators’ understanding of evolving securities offering terms and disclosures, and providing scholars with access to transaction document databases.
In their paper, “A Model of Optimal Government Bailouts,” Eric Talley and co-authors Antonio E. Bernardo and Ivo Welch, identify circumstances in which the government can (and cannot) serve a useful purpose in bailing out banks and other “too big to fail” institutions. They assess the Troubled Asset Relief Program (TARP) bailouts in 2008-9 and recommend that future policymakers exercise such power in very limited circumstances. When bailouts do occur, governments should avoid an active role in firm management, eliminate the owners (shareholders) and managers who led the firm into failure, and finance bailouts through a tax on the business community generally, not solely on the bailed out firms that recover.
Matthew R. DalSanto will present his paper, The Economics of Horizontal Government Cooperation, on April 11, 2011 for Berkeley Law’s Law and Economic Workshop. This paper analyzes the economic properties of intrastate and interstate cooperative agreements. A review of the legal case law surrounding compacts is conducted to analyze the legal properties from an economic perspective. These economic properties are used to develop a simple game-theoretic environment and a neoclassical growth model. The models demonstrate that the compact mechanism can lead to superior outcomes for the signatory governments’ citizenry.
In a new paper, “Freedom to Trade and the Competitive Process,” Aaron Edlin and Joseph Farrell explore the idea that antitrust courts protect the process of firms and customers forming coalitions that allow them to trade to their mutual betterment.
Robert Bartlett publishes, “The Determinants of Buyout Returns: Does Transaction Strategy Matter?” This paper reexamines one of the most studied questions in the scholarship of leveraged buyouts (LBOs): how do LBO sponsors create value for their investors in take-private acquisitions? In so doing, the paper makes two significant contributions to our understanding of LBOs. Most importantly, the paper provides the first-ever analysis of the equity returns to LBO sponsors.
Aaron Edlin analyzes three standards for identifying predatory pricing in, “Predatory Pricing.”
Nancy Wallace presented her paper “CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009“at the National Bureau of Economic Research (NBER) Conference on Market Institutions and Financial Market Risk in New York City. The paper is jointly authored with Richard Stanton and was also presented at the Swedish Central Bank (Riksbank) in Stockholm and at the Stockholm School of Economics.
Robert P. Bartlett’s paper “Going private but staying public: Reexamining the effect of Sarbanes-Oxley on firms’ going-private decisions,” and Eric Talley’s co-authored paper, “Going-private decisions and the Sarbanes-Oxley Act of 2002: A cross-country analysis” have been selected as two of the top 10 corporate and securities articles of 2009 in an annual nationwide poll of corporate and securities law faculty conducted by the Corporate Practice Commentator.
Robert P. Barlett’s paper “Inefficiencies in the Information Thicket: A Case Study of Derivatives Disclosure During the Financial Crisis,” deals with the causes of the Financial Crisis, from insufficient disclosure from firms’ exposure to complex credit derivatives, and how numerous factors led to the uncertainty that plagued the financial sector in the fall of 2008.
Inefficiencies in the Information Thicket: A Case Study of Derivative Disclosures During the Financial Crisis Berkeley Center for Law and Business, UC Berkeley Public Law Research Paper No. 1585953
Eric Talley presents, “Left, Right, and Center: Strategic Information Acquisition and Diversity in Judicial Panels,” at the Public Law and Legal Theory Workshop at the University of Chicago, School of Law.
Robert P. Bartlett comments on “Contracts as Organizations” by Gordon Smith and Brayden G. King.
Robert P. Bartlett’s paper “Taking Finance Seriously: How Debt-Financing Distorts Bidding Outcomes in Corporate Takeovers” explains the importance of finance in explaining bidder valuations and how accurate economic analysis of takeovers requires careful attention to bidders’ divergent financing decisions.
Robert P. Bartlett presents “Venture Capital, Agency Costs, and the False Dichotomy of the Corporation“. This paper focuses on how an implicit dichotomy of the corporation exists in legal scholarship. Barlett argues that understanding the agency problems that can exist within a firm demands a rejection of a traditional dichotomy and the theories of the firm built upon it.
Robert P. Bartlett’s paper “Understanding Price-Based Antidilution Protection: Five Principles to Apply When Negotiating a Down-Round Financing” provides a practical guide for applying and understanding price-based antidilution protection.