CORPORATE LAW: LAW & FINANCE eJOURNAL
"Teaching Business Associations Law in the Evolving New Market Economy"
8 Md. J. Bus. & Tech. Law 175 (2013)
JOAN MACLEOD HEMINWAY, University of Tennessee College of Law
Over the past ten years, the doctrinal rules governing business associations become more complex (with, e.g., the addition of significant federal law on corporate governance and corporate finance and the recent enactment of social enterprise forms of entity). Moreover, a number of us have added experiential learning to the business associations course (or another similarly titled foundational course on business entity law) and have increased the number and types of assessment tools used in our business associations pedagogy. This has made the task of teaching business associations somewhat overwhelming.
Law faculty respond to the challenges of teaching introductory business associations courses in many different, valid ways. This essay, originally written as a discussion session paper for the 2012 annual conference of the Southeastern Association of Law Schools, identifies these trends and describes my ways of contending with them. My goal in publishing this work is to offer some help to faculty members interested in developing or revamping a business associations course offering can design courses that (1) efficiently use available resources, (2) build from individual strengths, (3) meet institutional curricular and degree requirements, and (4) educate our students for the short-term and long-term demands of a business law or other practice in a rapidly changing legal employment and education setting.
"Why are U.S. Stocks More Volatile?"
Journal of Finance, Vol. 67, No. 4, 2012, pp. 1329-1370
SÖHNKE M. BARTRAM, Warwick Business School - Department of Finance
GREGORY W. BROWN, University of North Carolina (UNC) at Chapel Hill - Finance Area
RENE M. STULZ, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)
U.S. stocks are more volatile than stocks of similar foreign firms. A firm’s stock return volatility can be higher for reasons that contribute positively (good volatility) or negatively (bad volatility) to shareholder wealth and economic growth. We find that the volatility of U.S. firms is higher mostly because of good volatility. Specifically, firm stock volatility is higher in the U.S. because it increases with investor protection, stock market development, new patents, and firm-level investment in R&D. These are all factors that are related to better growth opportunities for firms and better ability to take advantage of these opportunities.
"Restructuring Projects in Financial Distress"
JOHN M. KWAKU MENSAH, SMC University
The recent paradigm shift in financing capital intensive projects by private and public entities from traditional corporate finance schemes with project finance schemes has witnessed massive surge in the corporate world. However, a number of such projects are either plunged into financial distress at preliminary phases or operational phases. To address this issue, this paper examined the general overview of financially distressed project by reviewing adequate literature regarding project finance and financial distress, outlining the major signs of financial distress associated with projects and recommend suitable solution to projects engulfed in financial distress. To achieve this goal, capital structural reforms in the area of increasing equity capital requirement is advisable in view of the existing arrangement which allows equity investment of 10% to 20% in most cases. Ascertaining optimal capital structure that would enable the avoidance of finance distress requires further research.
"Fiduciary Law and Responsible Investing: In Nature's Trust"
B. Richardson, Fiduciary Law and Responsible Investing: In Nature's Trust, Routledge, 2013
BENJAMIN J. RICHARDSON, University of British Columbia - Faculty of Law
This book investigates fiduciary law’s influence on the financial economy’s environmental performance. It focuses on how the law affects responsible investing and considers possible legal reforms to shift financial markets towards sustainability. Fiduciary law governs how trustees, fund managers and other custodians administer the investment portfolios owned by beneficiaries. Written for a diverse audience, not just legal scholars, the book examines in a multi-jurisdictional context an array of philosophical, institutional and economic issues that have shaped the movement for responsible investing and its legal framework. Fiduciary law has acquired greater influence in the financial economy in tandem with the extraordinary recent growth of institutional funds such as pension plans and insurance company portfolios. While the fiduciary prejudice against responsible investing has somewhat waned in recent years, owing mainly to reinterpretations of fiduciary and trust law, significant barriers remain.
This book advances the notion of ‘nature’s trust’ to metaphorically signal how fiduciary responsibility should accommodate society’s dependence on long-term environmental well-being. Financial institutions, managing vast investment portfolios on behalf of millions of beneficiaries, should manage those investments with regard to the broader social interest in sustaining ecological health. Even for their own financial self-interest, investors over the long term should benefit from maintaining nature’s capital. We should expect everyone to act in nature’s trust, from individual funds to market regulators. The ancient public trust doctrine could be refashioned for stimulating this change, and sovereign wealth funds should take the lead in pioneering best practices for environmentally responsible investing.
"Mandatory Registration and Return Misreporting by Hedge Funds"
STEPHEN G. DIMMOCK, Nanyang Technological University - Division of Finance
WILLIAM CHRISTOPHER GERKEN, University of Kentucky - Finance
In 2004, the SEC passed Rule IA-2333, which required most U.S. hedge fund advisors to register. In 2006, a federal court revoked Rule IA-2333. Differences-in-differences tests using these two changes in the regulatory regime show that increased regulatory oversight reduces return misreporting by hedge funds. Following Rule IA-2333, misreporting by newly registered funds decreased relative to previously registered funds. After Rule IA-2333 was revoked, misreporting significantly increased for the funds that chose to deregister. These effects are stronger for funds with illiquid portfolios, custody of clients’ securities, stronger performance incentives, more experienced SEC examiners, and that are nearer to an SEC regional office. Tests of both the level and the performance sensitivity of flows suggest that investors value registration.
"How Does Corporate Law Matter? ‘Law and Finance’ and Beyond"
ALESSIO M. PACCES, Erasmus School of Law, Erasmus University Rotterdam - Rotterdam Institute of Law and Economics, European Corporate Governance Institute
This paper discusses the law and finance scholarship, from its beginning to its developments into legal research and policymaking. The key issue of the importance of law for finance is illustrated along with the controversy on the law matters proposition. The focus of the paper, however, is on what is missing from the framework originally set by La Porta et al. I argue that the importance of the law for finance goes beyond investor protection. Efficient corporate law must include the support for entrepreneurship in corporate governance.
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CORPORATE, SECURITIES & FINANCE LAW EJOURNALS
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