M & A Law Prof Blog

Paradigm Shift: Federal Securities Regulation in the New Millennium

I'm presenting the paper Paradigm Shift:  Federal Securities Regulation in the New Millennium tomorrow in New York at the American Association of Law Professors annual meeting of the securities regulation section.  Here is the abstract:

In May 2007, Oaktree Capital Management LLC, a U.S.-based hedge fund adviser with over forty billion dollars in assets under management, sold approximately fourteen percent of its equity for more than $800 million in a widespread offering made to a number of prospective purchasers. This equity offering was not made on the New York Stock Exchange or Nasdaq. Instead, Oaktree's initial offering was made on the U.S. private market. The company thereafter listed its equity securities on Goldman Sachs & Co.'s non-public market, the GS Tradable Unregistered Equity OTC Market. This offering is emblematic of a paradigm shift occurring in the capital markets: the market for capital is increasingly competitive and global, viable public and private markets are proliferating world-wide, domestic investing patterns are changing as intermediary investing and deretailization occur, and financial innovation is quickening. The result is an on-going, perhaps revolutionary, transformation in the scope and structure of the global and domestic capital markets. This essay is about this paradigm shift, its implications for the SEC regulatory process and the future of federal securities regulation. It was prepared for and will be presented at the 2008 meeting of the AALS securities regulation section.

I hope to see you there. 

Central States Law School Association and the Journal of Law in Society Joint Conference October 26-27, 2007

The Central States Law School Association and the Journal of Law in Society announce a joint conference at Wayne State University Law School in Detroit, Michigan on October 26-27, 2007. The conference will consist of a Friday afternoon symposium presentation of selected papers and Saturday open workshop panel presentations. With author consent, the selected symposium papers will be published in the Journal of Law in Society as its symposium issue for 2007-2008.

Authors will present selected symposium papers on Friday afternoon in up to three panel sessions with question and answer periods at the end of each panel session. A participant dinner will be held at the close of the panels on Friday. From 9 am until 4 pm on Saturday, authors will present papers on any private or public-law topic in a number of workshop panels, with question and answer periods either after each paper or at the end of each panel as the authors decide. The annual meeting of the Central States Law School Association and election of officers for 2007-2008 will conclude the conference on Saturday evening.

Symposium Topic

Does Globalization Represent a Threat or Promise for Social Justice and Democratic Institutions? With the rapid pace of globalization, countries have witnessed increasing integration of communications, economic processes, and financial markets. There is a widespread assumption that the competitive pressures unleashed by globalization are ultimately useful in spurring broader economic growth and greater integration, yet there is also growing concern that globalization plays a direct role in creating new and in some cases apparently insoluble problems for social justice and democratic institutions.

Conference participants are invited to consider this topic from three perspectives: (1) Does the growing power of corporations and their concomitant ability to set the terms of competition in a globalized economy aid or hurt social justice and democratic institutions? (2) Do increases in property right protection (including intellectual property regimes) aid or hurt social justice and democratic institutions? (3) Do financial and tax competition aid or hurt social justice and democratic institutions?

Open workshop paper proposals or abstracts may be submitted anytime up until August 25, 2007. Workshop paper proposals will continue to be accepted after the August deadline, subject to the availability of presentation slots.

Proposals must contain the following information: (1) name, address, telephone, and email; (2) title of presentation; (3) brief description of presentation idea; and (4) organization affiliation and position. Completed papers are not required, although they are welcome. Please send submissions via email to Mr. Oday Salim at the following email address: thejournal@wayne.edu. In the subject line, please include your name and the words "Central States."

Any other questions can be addressed to any of our officers:

President Linda Beale, Associate Professor, Wayne State University Law School, lbeale@wayne.edu; (313)577-3941

Vice-President Cindy Buys, Assistant Professor, Southern Illinois University School of Law, cbuys@siu.edu; (618)453-8743

Treasurer Carolyn Dessin, Associate Professor, University of Akron School of Law, cld3@uakron.edu; (330)972-6358

Secretary Danshera Cords, Associate Professor, Capital University Law School, dcords@law.capital.edu; (614)236-6516

Law and Finance Revisited

Perhaps one of the more interesting papers presented at last week's Law and Society Annual Meeting in Berlin was Holger Spamann's, On the Insignificance and/or Endogeneity of La Porta et al.'s 'Anti-Director Rights Index' under Consistent Coding.  Here is the abstract:

I re-code the "Antidirector Rights Index" (ADRI) of shareholder protection rules from La Porta et al. 1998 for 46 countries in 1997 and 2005 with the help of local lawyers. My emphasis is on consistent coding; I do not change the original variable definitions. Consistently coded ADRI values are neither distributed with significant differences between Common and Civil Law countries, nor predictive of stock market outcomes. The revision of the variable definitions in Djankov et al. 2005 salvages some of the original results, but reinforces severe endogeneity concerns regarding the index components that drive the remaining significant results. I review the other index components and conclude that the ADRI is unlikely to be a valid measure of shareholder protection. Results derived with the ADRI in the literature may have to be revisited. Along the way, I develop some general guidelines for consistent coding.

Translating, Spamann looks at the famous article Law and Finance by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny (The Journal of Political Economy, Vol. 106, No. 6 (Dec., 1998), pp. 1113-1155).  That paper examines the legal rules covering protection of corporate shareholders in 49 countries.  It found that common law countries have the strongest protection for investors and civil law countries the weakest protections.   And its findings set off a host of scholarship on inter alia the jurisdictional path dependency and origins of corporate and securities regulation, the role of law in economic growth and building share equity premiums, and the relative strengths of various legal systems for investors.  By casting doubt on La Porta et al.'s findings, Spamann also throws into question all of this further scholarship.  Nonetheless, there has been an observable difference in equity premiums among all of these systems with common law countries generally having higher ones and the U.S. the highest.  The paper of La Porta et al. may have dubious groundings and others are bringing forward some good research to also dispute it and its progeny, but on some level all agree that the law and its protection of investors matters for finance, the question is really how and how much?