The success of a capitalist economy rests upon the ability of finance to sustain potentially
infinite growth, based on funding today the output of tomorrow. Finance, however, needs
rules. The aim of the law and finance scholarship is precisely to identify the best regulation
of finance to support economic growth.
Traditionally, law and finance is concerned with investor protection.
That would be enough
if the future was predictable. However, because the future is in fact uncertain, the prices of
financial assets are flawed and in the short run they may result in serious mistakes, if not
widespread crises. Although these mistakes are corrected in the long run, a lot of harm
may occur in between.
Financial law should therefore to be concerned not only with investor protection, but also
with mitigating the temporary excesses of markets in allowing or restricting access
to finance. The challenge of this goal is to remedy market myopia without allowing
policymakers to abuse the power of governments. However imperfect, prices remain the
best instrument of discipline and growth in a market economy.
Starting from the well-evidenced fact that banks with shareholder-focussed corporate governance fared worse in the financial crisis than those without, this paper considers various initiatives and proposals to re-orient board rules in relation to...Read more
In publicly traded companies, related party transactions (RPTs) are an obvious vehicle for shareholder expropriation. However, they may also be efficient, particularly when they are motivated by transaction cost savings. This paper aims to...Read more
We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently...Read more
This paper uses the staggered adoption of the Sarbanes-Oxley Act of 2002 for a difference-in-difference identification of the impact of corporate governance on hedging. In a large panel of listed US firms, we focus on two indexes of the legally...Read more