Law and corporate finance

Law and Corporate Finance

Volumn , Issue , 2007, Pages

  Cross, Frank B ^a   Prentice, Robert A ^a  

^a UNIVERSITY OF TEXAS AT AUSTIN   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 69949104780     PISSN: None     EISSN: None     Source Type: Book    
DOI: None     Document Type: Book

References (379)

1. Hernando de Soto, THE MYSTERY OF CAPITAL (2000).
2. Eugene Spector, Fraud Made Easy, NAT'L L.J., September 25, 2002, at A17.3.
3. Louis Kaplow & Steven Shavell, FAIRNESS VERSUS WELFARE (2002).
4. Gregg Easterbrook, THE PROGRESS PARADOX(2003). Easterbrook emphasized that Americans were steadily growing much richer in materiaterms, but this trend was accompanied by increased dissatisfaction with their lives.
5. Michael R. Hagerty & Ruut Veenhoven, Wealth and Happiness Revisited: Growing National Income Does Go with Greater Happiness, 64 SOC. INDICATORS RES. 1 (2003).
6. Douglass C. North, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE (1990).
7. Douglass C. North, Institutions and Economic Performance, in RATIONALITY, INSTITUTIONS AND ECONOMIC METHODOLOGY 245 (Uskali Maki, Bo Gustafsson, & Christian Knudsen eds. 1993).
8. Robert G. King & Ross Levine, Finance and Growth: Schumpeter Might Be Right, 108 Q. J. ECON. 717 (1993).
9. Ross Levine & Sara Zervos, Stock Markets, Banks, and Economic Growth, AM. ECON. REV. 537 (1998).
10. Asli Demirguc-Kunt & Vojislav Maksimovic, Law, Finance, and Firm Growth, 53 J. FIN. 2107 (1998).
11. Jeffrey Wurgler, Financial Markets and the Allocation of Capital, 58 J. FIN. ECON. 187 (2000).
12. Geert Bekaert, Campbell R. Harvey, & Christian Lundblad, Emerging Equity Markets and Economic Development, NBER Working Paper #7763 (June 2000).
13. R.G. Rajan & Luigi Zingales, Financial Dependence and Growth, 88 AM. ECON. REV. 559 (1998).
14. Ross Levine, Law, Finance, and Economic Growth, 8 J. FIN. INTERMED. 8 (1999).
15. Peter L. Rousseau & Richard Sylla, Emerging Financial Markets and Early U.S. Growth, NBER Working Paper #7448 (December 1999).
16. Peter L. Rousseau & Paul Wachtel, Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries 30 J. MONEY, CREDIT & BANKING 657 (1998).
17. R.G. Rajan & Luigi Zingales, Financial Dependence and Growth, 88 AM. ECON. REV. 559 (1998).
18. Rob Bauer, Nadja Guenster, & Roger Otten, Empirical Evidence on Corporate Governance in Europe: The Effect on Stock Returns, Firm Value and Performance (October 23, 2003).
19. Bernard Black, Does Corporate Governance Matter? A Crude Test Using Russian Data, 149 U. PENN. L. REV. 1231 (2001).
20. Carlos E. Campos, Roberto E. Newell, & Gregory Wilson, Corporate Governance Develops in Emerging Markets, MCKINSEY ON FINANCE 19 (Winter 2002).
21. Simon Johnson, John McMillan, & Christopher Woodruff, Property Rights, Finance and Entrepreneurship, Stanford Law and Economics Olin Working Paper No. 231 (March 2002) (studying Eastern European countries after the fall of communism and finding that property rights were sufficient to support necessary investment from retained earnings).
22. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny, Legal Determinants of External Finance, 52 J. FIN. 1131 (1997).
23. Jonathan Baron & Ilana Ritov, Intuitions About Penalties and Compensation in the Context of Tort Law, 7 J. RISK & UNCERTAINTY 17, 32 (1993).
24. World Bank, WORLD DEVELOPMENT REPORT 2002: BUILDING INSTITUTIONS FOR MARKETS 123 (2002).
25. Friedrich Schneider & Dominik Enste, Shadow Economies: Size, Causes, and Consequences, 38 J. ECON LIT. 77 (2000).
26. Robert C. Ellickson, ORDER WITHOUT LAW (1991).
27. Lisa Bernstein, Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry, J. LEGAL STUD. 21 (January 1992).
28. Frank H. Easterbrook & Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW 2 (1991).29. Thrainn Eggertsson, ECONOMIC BEHAVIOR AND INSTITUTIONS 317 (1990).
29. Thrainn Eggertsson, ECONOMIC BEHAVIOR AND INSTITUTIONS 317 (1990)
30. John Wallis & Douglass C. North, Measuring the Transactions Sector in the American Economy, in LONG TERM FACTORS IN AMERICAN ECONOMIC GROWTH 121 (S. Engerman & R. Gallman eds. 1986).
31. Stephen Choi, Regulating Investors Not Issuers: A Market-Based Proposal 88 CAL. L. REV. 279 (2000).
32. Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 YALE L.J. 2359 (1998).
33. P.K. Rao, THE ECONOMICS OF TRANSACTION COSTS 9 (2003).
34. Robert D. Putnam, BOWLING ALONE: THE COLLAPSE AND REVIVAL OF AMERICAN COMMUNITY 145-46 (2000).
35. George Dent, Lawyers and Trust in Business Alliances, 58 BUS. LAWYER 45, 45 (2002).
36. Michael Taylor, THE POSSIBILITY OF COOPERATION (1987).
37. Sim B. Sitkin & Nancy L. Roth, Explaining the Limited Effectiveness of Legalistic "Remedies" for Trust/Distrust, 4 ORG. SCI. 367 (1993).
38. Sumantra Ghoshal & Peter Moran, Bad for Practice: A Critique of the Transaction Cost Theory, 21 ACAD. MANAGEMENT REV. 13, 24 (1996).
39. Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 AM. SOCIOL. REV. 55 (1963).
40. David Charny, Nonlegal Sanctions in Commercial Relationships, 104 HARV. L. REV. 373 (1990).
41. World Bank, BUILDING INSTITUTIONS FOR MARKETS 171 (200210. Lisa Bernstein, Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry, 21 J. LEGAL STUD. 1 (1992).
42. Matt Ridley, THE ORIGINS OF VIRTUE 202 (1996).
43. Gillian K. Hadfield, Contract Law is Not Enough: The Many Legal Institutions that Support Contractual Commitments, at 6, forthcoming in HANDBOOK OF NEW INSTITUTIONAL ECONOMICS (Claude Menard & Mary Shirley eds. 2004).
44. Avinash K. Dixit, LAWLESSNESS AND ECONOMICS 16 (2004).
45. George A. Akerlof, The Market for "Lemons": Quality Uncertainty and the Market Mechanism,84 Q.J. ECON. 488 (1970).
46. Roy J. Lewicki, et al., Trust and Distrust: New Relationships and Realities, 23 ACAD. MANAGEMENT REV. 438 (1998).
47. Kathryn Hendley, Peter Murrell, & Randi Ryterman, Law Works in Russia: The Role of Law in Interenterprise Transactions, in ASSESSING THE VALUE OF LAW IN TRANSITION ECONOMIES (Peter Murrell ed. 2001).
48. John McMillan & Christopher Woodruff, Courts and Relational Contracts, 18 J. L. ECON. & ORG. 221 (2002).
49. John Shuhe Li, Relation-Based versus Rule-Based Governance: An Explanation of the East Asian Miracle and Asian Crisis, 11 REV. INT'L ECON. 651 (2003).
50. Avinash K. Dixit, LAWLESSNESS AND ECONOMICS 12 (2004).
51. P. Milgrom & J. Roberts, Economic Theories of the Firm: Past, Present, and Future, 11 CAN. J. ECON. 444, 449 (1988).
52. John P. Powelson, THE MORAL ECONOMY 111 (1998).
53. Alfred Chandler, SCALE AND SCOPE: THE DYNAMICS OF INDUSTRIAL CAPITALISM 286-87 (1990).
54. Frank H. Easter brook & Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW 130-31(1991).
55. Roger Lowenstein, ORIGINS OF THE CRASH 153 (2004).
56. Frank Partnoy, INECTIOUS GREED (2003).
57. Jonathan R. Macey, A Pox on Both Your Houses: Enron, Sarbanes-Oxley and the Debate Concerning the Relative Efficacy of Mandatory Versus Enabling Rules, 81 WASH. U. L. Q. 329, 342 (2003).
58. Arthur A. Schulte, Jr., Compatibility of Management Consulting and Auditing, 40 ACCT. REV. 587 (1965).
59. Robert A. Prentice, The Case of the Irrational Auditor: A Behavioral Insight into Securities Fraud Litigation, 95 N.W. U. L. REV. 133, 194 (2000).
60. Stanley Bairman, Discussion of Auditing: Incentives and Truthful Reporting, 17 J. ACCT. RES. 25 (1979).
61. of Scolds and Conflicts, WALL ST. J., June 22, 2004, at A18.
62. Donald Wittman, THE MYTH OF DEMOCRATIC FAILURE: WHY POLITICAL INSTITUTIONS ARE EFFICIENT (1995).
63. Oriana Bandiera, Land Reform, the Market for Protection and the Origins of the Sicilian Mafia: Theory and Evidence, 19 J. LAW ECON. & ORG. 218 (2003).
64. Frank B. Cross, Law and Economic Growth, 80 TEX.L.REV. 1751-52 (2002).
65. L.J. Zucker, The Production of Trust: Institutional Sources of Economic Structure, 8 RESEARCH IN ORG. BEHAVIOR 55 (1986).
66. Conlisk notes: "There is a mountain of experiments in which people: display intransitivity; misunderstand statistical independence; mistake random data for patterned data and vice versa; fail to appreciate law of large number effects; fail to recognize statistical dominance; make errors in updating probabilities on the basis of new information; understate the significance of given sample sizes; fail to understand covariation for even the simplest 2_2 contingency tables; make false inferences about causality; ignore relevant information; use irrelevant information (as in sunk cost fallacies); exaggerate the importance of vivid over pallid evidence; exaggerate the importance of fallible predictors; exaggerate the ex ante probability of a random event which has already occurred; display overconfidence in judgment relative to evidence; exaggerate confirming over disconfirming evidence relative to initial beliefs; give answers that are highly sensitive to logically irrelevant changes in questions; do redundant and ambiguous tests to confirm an hypothesis at the expense of decisive tests to disconfirm; make frequent errors in deductive reasoning tasks such as syllogisms; place higher value on an opportunity if an experimenter rigs it to be the "status quo" opportunity; fail to discount the future consistently; fail to adjust repeated choices to accommodate intertemporal connections; and more." John Conlisk, Why Bounded Rationality?, 34 J. ECON. LIT. 669, 670 (1996).
67. Larry T. Garvin, Adequate Assurance of Performance: of Risk, Duress, and Cognition, 69 U. COLO. L. REV. 71, 145 (1998) ("Cognitive psychology and experimental economics have found a smorgasbord of cognitive errors, which collectively falsify most of the axioms of rational choice theory.").
68. BOUNDED RATIONALITY: THE ADAPTIVE TOOLBOX (Gerd Gigerenzer & Reinhard Selten eds. 1999).
69. THE ECONOMICS OF IRRATIONAL BEHAVIOR (Francesco Parisi & Vernon Smith eds. forthcoming).
70. Herbert A. Simon, ADMINISTRATIVE BEHAVIOR xxiv (2d ed. 1957).
71. Max H. Bazerman, JUDGMENT IN MANAGERIAL DECISION MAKING 39-41 (3d ed. 1994).
72. Leon Festinger, A THEORY OF COGNITIVE DISSONANCE (1957).
73. Antonio R. Damasio, DESCARTES' ERROR (1994).
74. erner F.M. De Bondt, A Portrait of the Individual Investor, 42 EUR. ECON. REV. 831 (1998).
75. Robert J. Shiller, IRRATIONAL EXUBERANCE 143 (2000).
76. Barbara Moses, Research Analysts Under Fire, ALI-ABA Broker Dealer Regulation Course study (January 10-11, 2002).
77. Roni Michaely & Kent L. Womack, Conflict of Interest and the Credibility of Underwriter Analyst Recommendations, 12 REV. FIN. STUD. 653 (1999).
78. Andrei Shleifer, INEFFICIENT MARKETS: AN INTRODUCTION TO BEHAVIORAL FINANCE 187 (2000).
79. Irving L. Janis, GROUPTHINK: PSYCHOLOGICAL STUDIES OF POLICY DECISIONS AND FIASCOES 9 (2d ed. 1982).
80. Max Sutherland, ADVERTISING AND THE MIND OF THE CONSUMER 21 (1993).
81. Showing Fidelity, FINANCIAL TIMES, June 9, 2004, at 14.
82. Brad M. Barger, et al., OUT OF SIGHT, OUT OF MIND: THE EFFECTS OF EXPENSES ON MUTUAL FUND FLOWS 1 (December 2003), available at http://ssrn.com/abstract_496315.
83. Daniel Kahneman & Amos Tversky, Prospect Theory: An Analysis of Decision Under Uncertainty, 47 ECONOMETRICA 263 (1979).
84. Richard H. Thaler, Mental Accounting Matters, inADVANCES IN BEHAVIORAL ECONOMICS 75, 99 (Colin F. Camerer, George Loewenstein & Matthew Rabin eds. 2004).
85. Hal R. Arkes & Catherine Blumer, The Psychology of Sunk Cost, 35 ORGANIZATIONAL BEHAV. & HUM. DECISION PROCESSES 124 (1985).
86. TIME AND DECISION: ECONOMIC AND PSYCHOLOGICAL PERSPECTIVES ON INTERTEMPORAL CHOICE (George Loewenstein, Daniel Read & Roy F. Baumeister eds. 2003).
87. Reinier H. Kraakman, Corporate Liability Strategies and the Costs of Legal Controls, 93 YALE L. J. 857, 888 (1984).
88. Robert A. Prentice, Chicago Man, K-T Man, and the Future of Behavioral Law and Economics, 56 VAND. L. REV. 1663, 1696-1702 (2003).
89. Gary W. Emery, CORPORATE FINANCE: PRINCIPLES AND PRACTICE 600-603 (1998).
90. Michael C. Jensen, Some Anomalous Evidence Regarding Market Efficiency, 6 J. FIN. ECON. 95 (1978).
91. Richard H. Thaler, THE WINNER'S CURSE (1992).
92. Richard H. Thaler, QUASI-RATIONAL ECONOMICS (1991).
93. Richard H. Thaler, ADVANCES IN BEHAVIORAL FINANCE (R. Thaler ed. 1993).
94. ADVANCES IN BEHAVIORAL ECONOMICS (Colin F. Camerer, George Loewenstein, & Matthew Rabin eds. 2004).
95. Stephen C. Choi & A.C. Pritchard, Behavioral Economics and the SEC, 56 STAN. L. REV. 1, 5 (2003).
96. Sholom Benartzi & Richard H. Thaler, Myopic Loss Aversion and the Equity Premium Puzzle, 110 Q. J. ECON. 73 (1995).
97. Terrance Odean, Do Investors Trade Too Much?, 89 AM. ECON. REV. 1279 (1999).
98. Richard Deaves, et al., AN EXPERIMENTAL TEST OF THE IMPACT OF OVERCONFIDENCE AND GENDER ON TRADING ACTIVITY 21 (2003), available at http://ssrn.com/abstract_497284.
99. Terrance Odean, Are Investors Reluctant to Realize Their Losses?, 53 J. FIN. 1775 (1998).
100. Dale Griffin & Amos Tversky, The Weighing of Evidence and the Determination of Confidence, 24 COG. PSYCHOL. 411 (1992).
101. Nick Barberis, Andrei Shleifer & Robert Vishny, A Model of Investor Sentiment, 49 J. FIN. ECON. 307 (1998).
102. Larry E. Ribstein, Market vs. Regulatory Responses to Corporate Fraud: A Critique of the Sarbanes-Oxley Act of 2002, 28 IOWA J. CORP. L. 1, 22-23 (2002).
103. Lynn A. Stout, The Unimportance of Being Efficient: An Economic Analysis of Stock Market Pricing and Securities Regulation, 87 MICH. L. REV. 613, 647 (1988).
104. Riva D. Atlas, Even the Smart Money Can Slip Up, N.Y. TIMES, December 30, 2001, sec. 3, at 1.
105. Robert A. Prentice, Chicago Man, K-T Man, and the Future of Behavioral Law and Economics, 56 VANDERBILT LAW REVIEW 1663, 1728-29 (2004).
106. Hersh Shefrin, BEYOND GREED AND FEAR: UNDERSTANDING BEHAVIORAL FINANCE AND THE PSYCHOLOGY OF INVESTING 58 (2000).
107. Jacob Jacoby, Is It Rational to Assume Consumer Rationality? Some Consumer Psychological Perspectives on Rational Choice Theory 2-3, N.Y. Univ. Ctr. for Law & Bus., Working Paper #CLB-00-009, 2000.
108. Robert J. Shiller, IRRATIONAL EXUBERANCE 379-400 (2000).
109. Robert J. Shiller, Bubbles, Human Judgment, And Expert Opinion 2-3, 11 Cowles Found., Discussion Paper No. 1303 (May 2001).
110. Werner de Bondt, EARNINGS FORECASTS AND SHARE PRICE REVERSALS (1992).
111. Henry Hu, Misunderstood Derivatives: The Causes of Informational Failure and the Promise of Regulatory Incrementalism 102 YALE L. J. 1457, 1489 (1993).
112. Ronald Coase, The Problem of Social Cost, 3 J. L. & ECON. 1 (1960).
113. Cass R. Sunstein, Looking Forward: Behavioral Analysis of Law 64 U. CHI. L. REV. 1175, 1179 (1997) ("The [Coase] theory is wrong because the allocation of the legal entitlement may well matter, in the sense that those who are initially allocated an entitlement are likely to value it more than those without the legal entitlement.").
114. Cass R. Sunstein, Switching the Default Rule, 77 N.Y.U. L. REV. 106, 112 (2002) (making this point).
115. Most people have a strong preference for the status quo.
116. Colin Camerer, Prospect Theory in the Wild, in CHOICES, VALUES, AND FRAMES 295 (Daniel Kahneman & Amos Tversky eds. 2000) (finding that motorists' choices of insurance coverage were significantly affected by default legislative rules)
117. Raymond S. Hartman, et al., Consumer Rationality and the Status Quo, 106 Q. J. ECON. 141, 160 (1991) (finding that electricity consumers given a choice between higher rates with higher reliability service and lower rates with lower reliability tended to choose whichever choice was presented as representing the status quo)
118. William F. Samuelson & Richard Zeckhauser, Status Quo Bias in Decision Making, 1 J. RISK & UNCERTAINTY 7, 26-33 (1988) (finding that people tend to select whichever investment alternative or health plan is presented as the status quo)
119. Maurice Schweitzer, Disentangling Status Quo and Omission Effects: An Experimental Analysis, 58 ORG. BEHAV. & HUM. DECISION PROCESSES 457, 472-73 (1994) (reporting experiments finding that people prefer both the status quo and inaction and that these preferences can be additive).
120. Robert A. Prentice & Jonathan J. Koehler, A Normality Bias in Legal Decision Making, 88 CORNELL L. REV. 583 (2003)
121. John S. Hammond, Ralph L. Keeney, & Howard Raiffa, The Hidden Traps in Decision Making, HARVARD BUSINESS REVIEW 47 (September-October 1998).
122. David Cohen & Jack L. Knetsch, Judicial Choice and Disparities Between Measures of Economic Values, 30 OSGOODE HALL L.J. 737 (1992).
123. Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 CORNELL L. REV. 608 (1998).
124. G. Richard Shell, Fair Play, Consent and Securities Arbitration: A Comment on Speidel, 62 BROOK. L. REV. 1365, 1367-69 (1996).
125. Francesco Parisi & Vernon Smith, THE LAW AND ECONOMICS OF IRRATIONAL BEHAVIOR: AN INTRODUCTION 5 (2004), available at http://ssrn.com/abstract_537784.
126. Ernst Fehr & Simon Gachter, Fairness and Retaliation: The Economics of Reciprocity, J. ECON. PERSP. 159 Summer 2000.
127. E. Allan Farnsworth, CONTRACTS 2,13-14 (1982).
128. Evelin Sullivan, THE CONCISE BOOK OF LYING 206 (2001).
129. DiLeo v. Ernst & Young, 901 F.2d 624 (7th Cir. 1990).
130. Patricia M. Dechow, et al., Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC, 13 CONTEMP. ACCT. RES. 1, 311996
131. Tom Lauricella, For Staid Mutual-Fund Industry, Growing Probe Signals Shake-Up, WALL ST. J., October 20, 2003, at A1 (quoting Levitt).
132. Tom Lauricella & Deborah Solomon, Scrutiny of Mutual Funds Grows as SEC Probes Deals With Brokers, WALL ST. J., October 23, 2003, at A1 (quoting Bogle).
133. All examples in the following laundry list are explicated in detail and documented fully in Robert A. Prentice, The Case of the Irrational Auditor: A Behavioral Insight into Securities Fraud Litigation, 95 NW. U. L. REV. 133 (2000).
134. George Loewenstein, Behavioral Decision Theory and Business Ethics: Skewed Trade-Offs Between Self and Others, in CODES OF CONDUCT: BEHAVIORAL RESEARCH INTO BUSINESS ETHICS 214, 226 (David M. Missick & Ann E. Tenbrunsel eds. 1996).
135. George M. Cohen, When Law and Economics Met Professional Responsibility, 67 FORDHAM L. REV. 273, 288 (1998).
136. William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF TORT LAW 280-81 (1987). Some game theorists have posited that it is, in many factual scenarios, rational for buyers to decide not to read seller-provided form contracts.
137. Avery Katz, The Strategic Structure of Offer and Acceptance: Game Theory and the Law Contract Formation, 89 MICH. L. REV. 215, 282-93 (1990) (noting "the fact that the decision to spend resources becoming informed must precede the information that reveals whether it is worth doing so, and that the drafters of form contracts have the incentive to take advantage of this ...[And] it is just this fact that makes reading irrational.").
138. Margaret M. Blair & Lynn A. Stout, Trust, Trustworthiness, and the Behavioral Foundations of Corporate Law, 149 U. PA. L. REV. 1735 (2001).
139. Thomas Donaldson & Thomas W. Dunfee, TIES THAT BIND: A SOCIAL CONTRACTS APPROACH TO BUSINESS ETHICS 95-96 (1999): "Outside sources may influence the development of norms. Law, particularly when it is perceived as legitimate by members of a community, may have a major impact on what is considered to be correct behavior. Thus, the U.S. Corporate Sentencing Guidelines may be expected to influence perceptions of appropriate structures and policies for assigning managerial responsibility pertaining to corporate social responsibility. Conventional wisdom holds that U.S. law has influenced changes in ethical norms pertaining to racial or genderbased discrimination and also as to the legitimacy of insider trading."
140. Mark Kelman, Consumption Theory, Production Theory, and Ideology in the Coase Theorem, 52 S. CAL. L. REV. 669, 695 (1979) (noting that "perhaps society learns what to value in part through the legal system's descriptions of our protected spheres")
141. Eric A. Posner, Law, Economics, and Inefficient Norms, 144 U. PA. L. REV. 1697, 1731 (1996) ("laws inevitably strengthen or weaken social norms by signaling an official stance toward them").
142. Iman Anabtawi, Secret Compensation, 82 N.C. L. REV. 835, 837 (2004).
143. Michael B. Dorff, Softening Pharaoh's Heart: Harnessing Altruistic Theory and Behavioral Law and Economics to Rein in Executive Salaries, 51 BUFF. L. REV. 811, 828-29 (2003).
144. Donald C. Langevoort, Organized Illusions: A Behavioral Theory of Why Corporations Mislead Stock Market Investors (and Cause Other Social Harms), 146 U. PA. L. REV. 101 (1997).
145. Frank H. Easterbrook & Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW 93-100 (1991).
146. Hal R. Arkes & Cindy Schipani, Medical Malpractice v. the Business Judgment Rule: Differences in the Hindsight Bias, 73 OR. L. REV. 587 (1994).
147. This discussion largely tracks a discussion contained in Robert A. Prentice, Whither Securities Regulation? Some Behavioral Observations Regarding Proposals for its Future, 51 DUKE L.J. 1397 (2002).
148. Abolafia, infra note 80, at 187.
149. Frank Partnoy, F.I.A.S.C.O.: BLOOD IN THE WATER ON WALL STREET (1997), at 60-61.
150. Michael Lewis, LIAR'S POKER: RISING THROUGH THE WRECKAGE OF WALL STREET 164-70 (1989).
151. Dean Witter, Officials Face NASDR Charges Over Sales of Risky Bond Trust Investments, BNA SEC. L. DAILY, Nov. 21, 2000.
152. Mitchel Y. Abolafia, MAKING MARKETS: OPPORTUNISM AND RESTRAINT ON WALL STREET 4 (1996) (noting "a seemingly unending stream of recent scandals" involving professional stock traders).
153. Ellen Kelleher, Brokers Face Action Over Annuity Advice, FINANCIAL TIMES, June 10, 2004, at 20.
154. Mitchell Pacelle, Republic New York Pleads Guilty to Fraud, Agrees to Pay Restitution, WALL ST. J., December 18, 2001, at C10.
155. Hersh. M. Shefrin & Meir Statman, Explaining Investor Preference for Cash Dividends, in ADVANCES IN BEHAVIORAL FINANCE 393, 408 (Richard Thaler, ed. 1993).
156. G. Richard Shell, Opportunism and Trust in the Negotiation of Commercial Contracts: Toward a New Cause of Action, 44 VAND. L. REV 221, 269 (1991) at 269.
157. Stephen M. Bainbridge, Mandatory Disclosure: A Behavioral Analysis, 68 U. CIN. L. REV. 1023 (2000).
158. William Samuelson & Richard Zeckhauser, Status Quo Bias in Decision Making, 1 J. RISK & UNCERTAINTY 7 (1988).
159. Jean C. Bedard, An Archival Investigation of Audit Program Planning, AUDITING: A J. OF PRAC & THEORY 57, 57-58 (Fall 1989).
160. Robyn M. Dawes, Social Dilemmas, 31 ANN. REV. PSYCHOL. 169, 187 (1980).
161. The following material is summarized from a much longer treatment contained in Robert A. Prentice, Contract-Based Defenses in Securities Fraud Litigation: A Behavioral Analysis, U. ILL. L. REV. 337 (2003).
162. William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF TORT LAW 280-81 (1987).
163. Larry E. Ribstein, Market vs. Regulatory Responses to Corporate Fraud: A Critique of the Sarbanes-Oxley Act of 2002, 28 IOWA J. CORP. L. 1, 22-23 (2002).
164. Nothing But the Truth About Why We Tell Lies, FINANCIAL TIMES, May 28, 2004 (citing Michael Berry, a senior lecturer in forensic psychology at Manchester Metropolitan University who notes that people who lie in business "have no emotional attachment to the business lie, so most lie detection systems would not discover them.").
165. G. Richard Shell, Fair Play, Consent and Securities Arbitration: A Comment on Speidel, 62 BROOK. L. REV. 1365, 1368 (1996).
166. Stephen Choi & Mitu Gulati, Innovation in Boilerplate Contracts: An Empirical Examination of Sovereign Bonds, 53 EMORY L.J. 929 (2004).
167. Hillary A. Sale, Gatekeepers, Disclosure, and Issuer Choice, 81 WASH. U. L. Q. 403, 406 (2003) (noting that the market did not adequately discount even for risks that were fully disclosed and questioning whether investors could accurately process information about which issuers chose pro-investor regimes and which chose anti-investor regimes).
168. Stephen J. Choi, Promoting Issuer Choice in Securities Regulation, 41 VA. J. INT'L. L. 815, 825 (2001).
169. Stephen C. Choi & A.C. Pritchard, Behavioral Economics and the SEC, 56 STAN. L. REV. 1 (2003).
170. Richard H. McAdams, An Attitudinal Theory of Expressive Law, 79 OR. L. REV. 339, 389 (2000).
171. Joel Seligman, THE TRANSFORMATION OF WALL STREET 178-79 (rev. ed. 1995) (noting long-term impact of the SEC's "revolution in financial morality" accomplished in the 1930s).
172. Elaine Welle, Freedom of Contract and the Securities Laws: Opting Out of Securities Regulation by Private Agreement, 56 WASH. & LEE L. REV. 519, 541 (1999).
173. Robert A. Prentice, Enroll: A Brief Behavioral Autopsy, 40 AM. BUS. L. REV. 417, 443-44 (2003).
174. O. Lee Reed, Law, the Rule of Law, and Property: Foundations for the Private Market and Business Study, 38 AM. BUS. L. J. 441, 449 (2001).
175. Douglass North, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE 46 (1990).
176. Avner Greif, Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders' Coalition, 83 AM. ECON. REV. 525 (1993).
177. E. Allan Farnsworth, CONTRACTS 11-12 (1982).
178. Philip M. Nichols, A Legal Theory of Emerging Economies, 39 VA. J. INT'L. L. 229, 264-65 (1999).
179. James Surowiecki, THE WISDOM OF CROWDS: WHY THE MANY ARE SMARTER THAN THE FEW AND HOW COLLECTIVE WISDOM SHAPES BUSINESS, ECONOMIES, SOCIETIES, AND NATIONS 121 (2004).
180. Hernando de Soto, THE MYSTERY OF CAPITAL: WHY CAPITALISM TRIUMPHS IN THE WEST AND FAILS EVERYWHERE ELSE 5-10 (2000).
181. Simon H. Johnson, John McMillan, and Christopher Woodruff, Property Rights and Finance, Stanford Law and Economics Olin Working Paper No. 231 (March 2002).
182. Douglass North, STRUCTURE AND CHANGE IN ECONOMIC HISTORY 147-57 (1981).
183. Charles Cadwell, Forword to Mancur Olson, POWER AND PROSPERITY viii (2000).
184. Ronald H. Coase, The Institutional Structure of Production, in NOBEL LECTURES IN ECONOMIC SCIENCE 11, 17 (Torsten Persson ed. 1997).
185. Charles I. Jones, Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run, 1 ADVANCES IN MACROECONOMICS 1028 (No. 2, 2001).
186. Fareed Zakaria, Lousy Advice Has Its Price, NEWSWEEK, September 27, 1999, at 40.
187. Jean Domat, I THE CIVIL CODE IN ITS NATURAL ORDERS (1850 William Strahan (trans.), republished Fred B. Rothman & Co., Colorado Springs, CO, 1980).
188. Stuart Banner, ANGLO-AMERICAN SECURITIES REGULATION: CULTURAL AND POLITICAL ROOTS, 1690-860, 117 (1998).
189. (1789) 100 Eng. Rep. 450.
190. PROSSER AND KEETON ON TORTS 728 (5th ed. 1984).
191. Joseph Angell & Samuel Ames, TREATISE ON THE LAW OF PRIVATE CORPORATIONS AGGREGATE (1832, reprint, N.Y. Arno Press, 1972), cited in Douglas Arner, Development of the American Law of Corporations to 1932, 55 SMU L. REV. 32 (2002).
192. Timur Kuran, WHY THE ISLAMIC MIDDLE EAST DID NOT GENERATE AN INDIGENOUS CORPORATE LAW 30 (2004).
193. John Micklethwait & Adrian Wooldridge, THE COMPANY: A SHORT HISTORY OF A REVOLUTIONARY IDEA 5-6 (2003).
194. John Kay, CULTURE AND PROSPERITY: THE TRUTH ABOUT MARKETS: WHY SOME NATIONS ARE RICH BUT MOST REMAIN POOR 322 (2004).
195. Quoted in Anthony Sampson, COMPANY MAN: THE RISE AND FALL OF CORPORATE LIFE 19 (1995).
196. Margaret M. Blari & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 VA. L. REV. 247 (1999).
197. Margaret M. Blair, Locking in Capital: What Corporations Law Achieved for Business Organizers in the 19th Century, 51 UCLA L. REV. 387, 395 (2003).
198. Ranald C. Michie, THE LONDON STOCK EXCHANGE: A HISTORY 17 (1999).
199. Douglas Arner, Development of the American Law of Corporations to 1832, 55 S.M.U. L. REV. 23, 44 (2002).
200. 10 U.S. (6 Cranch) 87 (1810).
201. 17 U.S. (4 Wheat) 518 (1819).
202. Henry Hansmann & Reinier Kraakman, THE ANATOMY OF CORPORATE LAW 10 (2004).
203. William J. Bernstein, THE BIRTH OF PLENTY: HOW THE PROSPERITY OF THE MODERN WORLD WAS CREATED 150 (2004).
204. Adam Smith, 2 AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS 733 (Oxford University Press, 1976).
205. Adolph A. Berle, Jr. & Gardiner C. Means, THE MODERN CORPORATION AND PRIVATE PROPERTY (1932).
206. Alfred F. Conard, The Supervision of Comparative Management: A Comparison of Developments in European and United States Law, 82 MICH. L. REV. 1459 (1984).
207. James A. Fanto, The Role of Corporate Law in French Corporate Governance, 31 CORNELL INT'L L.J. 31, 53 (1998).
208. John C. Coffee, Jr., Privatization and Corporate Governance: The Lessons from Securities Market Failure, 25 IOWA J. CORP. L. 1, 28-29 (1999).
209. Bernard Black, et al., Liability Risk for Outside Directors: A Cross-Border Analysis (2004).
210. R v. Fraternity of Hostman (1702) 93 Eng. Rep. 1142.
211. Randall S. Thomas, Improving Shareholder Monitoring of Corporate Management by Expanding Statutory Access to Information, 38 ARIZ. L. REV. 331, 337 (1996).
212. Leslie L. Cooney, A Modality for Accountability to Shareholders: The American Way?, 28 OKLA. CITY U. L. REV. 717 (2003).
213. Henry Hansmann & Reinier Kraakman, The Essential Role of Organizational Law, 110 YALE L.J. 387, 393 (2000).
214. 30 F.Cas. 435, 1824 U.S. App. LEXIS 422 (1824).
215. Henry Hansmann & Reinier Kraakman, The End of History for Corporate Law, 89 GEO. L.J. 439 (2001).
216. Peter Montagnon, A Short and Simple Regime for Corporate Europe, FINANCIAL TIMES, September 2, 2004, at 13.
217. William J. Bernstein, THE BIRTH OF PLENTY: HOW THE PROSPERITY OF THE MODERN WORLD WAS CREATED 23 (2004).
218. Stephen Ambrose, UNDAUNTED COURAGE 52 (1996).
219. Charles P. Kindleberger, MANIAS, PANICS, AND CRASHES: A HISTORY OF FINANCIAL CRISES 109-10 (4th ed. 2000).
220. Edward Chancellor, DEVIL TAKE THE HINDMOST: A HISTORY OF FINANCIAL SPECULATION 58-95 (1999).
221. Jonathan B. Baskin & Paul J. Miranti, Jr., A HISTORY OF CORPORATE FINANCE 113 (1997).
222. Paul Mahoney, Mandatory Disclosure as a Solution to Agency Problems, 62 U. CHI. L. REV. 1047 (1995).
223. Matthew Josephson, Infrequent Corporation Reports Keep Investors in Dark, 36 MAG. OF WALL ST. 302, 303 (June 20, 1925) (quoting NYSE economist Edward Meeker).
224. Quoted in Richard P. Brief, Corporate Financial Reporting at the Turn of the Century, J. ACCTCY. 144-45 (May 1987).
225. Roberta Romano, THE ADVANTAGE OF COMPETITIVE FEDERALISM FOR SECURITIES REGULATION 16 (2002).
226. Joel Seligman, THE TRANSFORMATION OF WALL STREET 47 (rev. ed. 1995).
227. John Kenneth Galbraith, THE GREAT CRASH 1929, 82-83 (1979).
228. Gary J. Previts & Barbara D. Merino, A HISTORY OF ACCOUNTANCY IN THE UNITED STATES: THE CULTURAL SIGNIFICANCE OF ACCOUNTING 267 (1998).
229. Laurence H. Sloan, CORPORATION PROFITS 333-37 (1929).
230. Thomas A. Halleran & John N. Calderwood, Effect of Federal Regulation on Distribution of and Trading in Securities, 28 GEO. WASH. L. REV. 86, 94 (1959).
231. Ad Hoc Task Force on Corporate Governance, OECD Principles of Corporate Governance (April 16, 1999), available at www.oecd.org/daf/governance/principles.htm.
232. 4 App. Case 337 (HL 1889) (Halsbury opinion).
233. Edgar v. Mite Corp., 457 U.S. 624 (1982).
234. CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).
235. Ass'n Francaise Des Entreprises Privees AFEP, Recommendations of the Committee on Corporate Governance 3-9 (1999), available at www.ecgi.org/codes/countrydocuments/ france/vienot2 en.pdf.
236. Philippe Marini, La modernisation du droit des societes, Rapport au premier ministre, Collection des rapports officiels, La documentation francaise (1996).
237. Nicholas H.D. Foster, Company Law Theory in Comparative Perspective: England and France, 48 AM. J. COMP. L. 573 (2000).
238. Robert J. Barro, DETERMINANTS OF ECONOMIC GROWTH (1997).
239. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny, Law and Finance, 106 J. POL. ECON. 1113 (1998).
240. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny, The Quality of Government, 15 J. LAW ECON. ORG. 222 (1999).
241. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny, Investor Protection and Corporate Governance, 58 J. FIN. ECON. 3 (2000).
242. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, & Robert W. Vishny, Investor Protection and Corporate Valuation, 57 J. FIN. 1147 (2002).
243. Rafael La Porta, Florencio Lopez-de-Silanes, & Andrei Shleifer, What Works in Securities Laws?, NBER Working Paper No. 9882 (July 2003).
244. Ross Levine, Law, Finance, and Economic Growth 8 J. FIN. INTERMEDIATION 8 (1999).
245. Thorsten Beck, Asli Demirguc-Kent, & Ross Levine, Law, Politics, and Finance, World Bank Working Paper No. 2585 (2001).
246. Ross Levine, Norman Loayza, & Thorsten Beck, Financial Intermediation and Growth: Causality and Causes, 46 J. MON. ECON. 31 (2000).
247. Gerard Caprio, Luc Laeven, & Ross Levine, Governance and Bank Valuation, NBER Working Paper No. W10158 (December 2003).
248. Thorsten Beck, Asli Demirguc-Kent, & Ross Levine, Law and Firms' Access to Finance, World Bank Working Paper No. 3194 (2004).
249. Leora F. Klapper & Inessa Love, Corporate Governance, Investor Protection, and Performance in Emerging Markets, World Bank Working Paper No. 2818 (April 2002).
250. Omar Azfar & Thornton Matheson, Market-Mobilized Capital 117 PUB. CHOICE 357(2003).
251. Davide Lombardo & Marco Pagano, Legal Determinants of the Return on Equity, CESF Working Paper No. 24 (October 1999).
252. Klaus Gugler, Dennis C. Mueller, & B. Burcin Yurtoglu, The Impact of Corporate Governance on Investment Returns in Developed and Developing Countries, 113 ECON. J. F511 (2003).
253. Frank H. Stephen & Stefan van Hemmen, Legal Rules and the Development of Financial Systems, presented at the Conference of the European Association of Law and Economics, September 2003.
254. Charles P. Himmelberg, R. Glenn Hubbard, & Inessa Love, Investor Protection, Ownership, and the Cost of Capital, World Bank Policy Research Working Paper No. 2834 (2002).
255. Randall Morck, Bernard Yin Yeung, & Wayne Yu, The Information Content of Stock Markets: Why Do Emerging Markets have Synchronous Stock Price Movements 58 J. FIN. ECON. 215 (2000).
256. Edward Glaeser, Simon Johnson, & Andrei Shleifer, Coase versus The Coasians, 116 Q. J. ECON. 853 (2001).
257. Luzi Hail & Christian Leuz, International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter, Wharton Financial Institutions Center Working Paper 04-06 (November 2003).
258. Stijn Claessens & Luc Laeven, Financial Development, Property Rights, and Growth, 58 J. FIN. 2401 (2003).
259. Stulz & Williamson, Culture, Openness and Finance, NBER Working Paper No. 222 (2001).
260. Ugo Mattei, COMPARATIVE LAW AND ECONOMICS (1997).
261. Raghuram G. Rajan & Luigi Zingales, The Great Reversals: The Politics of Financial Development in the 20th Century, NBER Working Paper No. 8178 (July 2002).
262. James Gwartney, Robert Lawson, & Walter Block, ECONOMIC FREEDOM OF THE WORLD 1975-1995 (1996)
263. Gerald P. O'Driscoll, Jr., Kim Holmes, & Melanie Kirkpatrick, INDEX OF ECONOMIC FREEDOM (2000).
264. Christopher Clague, et al., Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance, 4 J. ECON. GROWTH 185 (1999).
265. Thorsten Beck, Asli Demirguc-Kunt, & Ross Levine, A New Database on the Structure and Development of the Financial Sector, 14 WORLD BANK ECON. REV. 597 (2000).
266. Laura Nyantung Beny, Do Shareholders Value Insider Trading Laws? International Evidence, Harvard John M. Olin Series Discussion Paper No. 345 (December 2001).
267. Robert Bushman, Joseph Piotrosi, & Abbie Smith, What Determines Corporate Transparency?, 42 J. ACCTG. RES. 207 (2004).
268. Art Durnev & E. Han Kim, To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation (March 2004).
269. Data for this variable come from Albert Alesina, et al., FRACTIONALIZATION (2003).
270. Data for this variable come from World Economic Forum, THE GLOBAL COMPETITIVENESS REPORT 312 (1999).
271. Katharina Pistor, Martin Raiser, & Stanislav Gelfer, Law and Finance in Transition Economies, European Bank for Reconstruction and Development Working Paper No. 48 (February 2000).
272. Ole-Kristian Hope, Disclosure Practices, Enforcement of Accounting Standards, and Analysts' Forecast Accuracy: An International Study, 41 J. ACCTG. RES. 235 (2003).
273. Mark H. Lang, Karl V. Lins, & Darius P. Miller, ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm's Information Environment and Increase Market Value?, 41 J. ACCTG. RES. 317 (2003).
274. Mark J. Roe, Corporate Law's Limits, 31 J. LEGAL STUD. 233 (2002).
275. Richard H. McAdams, An Attitudinal Theory of Expressive Law, 79 OR. L. REV. 339, 389 (2000).
276. Alan Strudler & Eric W. Orts, Moral Principle in the Law of Insider Trading, 78 TEX. L. REV. 375 (1999).
277. Henry G. Manne, INSIDER TRADING AND THE STOCK MARKET (1966).
278. Dennis W. Carlton & Daniel R. Fischel, The Regulation of Insider Trading, 35 STAN. L. REV. 857 (1983).
279. Harold Demsetz, Corporate Control, Insider Trading and Rates of Return, 76 AM. ECON. REV. 313 (1986).
280. Kimberly D. Krawiec, Privatizing "Outsider Trading," 41 VA. J. INT'L L. 693 (2001).
281. 401 F.2d 833 (2d Cir. 1968).
282. Lawrence M. Ausubel, Insider Trading in a Rational Expectations Economy, 80 AM. ECON. REV. 1022 (1990).
283. United States v. O'Hagan, 521 U.S. 642 (1997).
284. S.C. Udpa, Insider Trading and the Information Content of Earnings, 23 J. BUS. FIN. & ACCOUNTING 1069 (1996).
285. Robert J. Haft, The Effect of Insider Trading Rules on the Internal Efficiency of the Large Corporation, 80 MICH. L. REV. 1051 (1982).
286. Lucian Bebchuk & Jesse Fried, PAY WITHOUT PERFORMANCE THE UNFULFILLED PROMISE OF EXECUTIVE COMPENSATION (2004).
287. Qiang Cheng & Terry D. Warfield, Equity Incentives and Earnings Management (November 2004), available at http://ssrn.com/abstract=457840.
288. Jap Efendi, Anup Srivastava, & Edward P. Swanson, Why Do Corporate Managers Misstate Financial Statements? The Role of In-the-Money Options and Other Incentives (September 4, 2005), available at http://ssrn.com/abstract=547922.
289. James S. Ang. & Don. R. Cox, Controlling the Agency Cost of Insider Trading, 10 J. FIN. & STRATEGIC DECISIONS 15 (1997).
290. Herbert Gintis, et al., Moral Sentiments and Material Interests: Origins, Evidence, and Consequences, in MORAL SENTIMENTS AND MATERIAL INTERESTS: THE FOUNDATIONS OF COOPERATION IN ECONOMIC LIFE 8 (Herbert Gintis, et al eds. 2005).
291. Robert A. Prentice & Jonathan J. Koehler, A Normality Bias in Legal Decision Making, 88 CORNELL L. REV. 583, 606-12 (2003).
292. Robert A. Prentice, Contract-Based Defenses in Securities Fraud Litigation: A Behavioral Analysis, U. ILL. L. REV. 337, 376 (2003).
293. Laura Nyantung Beny, Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence, 7 AM. LAW & ECON REV. 144 (2005).
294. Utpal Bhattacharya & Hazem Daouk, The World Price of Insider Trading, 57 J. FIN. 75 (2002).
295. Pankav Jain, Institutional Design and Liquidity at Stock Exchanges Around the World (January 2002).23. Robert M. Bushman, Joseph D. Piotroski, & Abbie J. Smith, Insider Trading Restrictions and Analysts' Incentives to Follow Firms, 60 J. FIN. 35 (2005).
296. Robert M. Bushman, Joseph D. Piotroski, & Abbie J. Smith, Insider Trading Restrictions and Analysts' Incentives to Follow Firms, 60 J. FIN. 35 (2005).
297. Julan Du & Shang-Jin Wei, Does Insider Trading Raise Market Volatility, 114 ECON. J. 916 (2004).
298. Tomasz P. Wisniewski, Reexamination of the Link Between Insider Trading and Price Efficiency, 28 ECON. SYSTEMS 209 (2004), available at www.sciencedirect.com/ science/article/B6W8Y-4CVX0YT-1/2/01c276b6edf476dfba6fe0ec26f321e9.
299. Carr v. CIGNA Securities, Inc., 95 F.3d 544 (7th Cir. 1996).
300. William N. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF TORT LAW 280-81 (1987).
301. Lee Ross, et al., The "False Consensus Effect": An Egocentric Bias in Social Perception and Attribution Processes, 17 J. EXPERIMENTAL SOC. PSYCHOL. 279 (1977).
302. Joseph W. Rand, The Demeanor Gap: Race, Lie Detection, and the Jury, 33 CONN. L.REV. 1, 3 (2000).
303. Stephen Choi, Regulating Investors Not Issuers: A Market-Based Proposal, 88 CAL. L. REV. 279 (2000).
304. Merle Erickson, Michelle Hanlon, Michelle, & Edward L. Maydew, Is There a Link Between Executive Compensation and Accounting Fraud? (February 24, 2004), available at http://ssrn.com/abstract=509505.
305. Robert A. Prentice, Chicago Man, K-T Man, and the Future of Behavioral Law and Economics, 56 VAND. L. REV. 1663 (2003).
306. Gary Belsky & Thomas Gilovich, WHY SMART PEOPLE MAKE BIG MONEY MISTAKES-AND HOW TO CORRECT THEM 152 (1999).
307. James A. Fanto, We're All Capitalists Now: The Importance, Nature, Provision and Regulation of Investor Education, 49 CASE W. RES. L. REV. 105, 135 (1998).
308. Robert A. Prentice, Whither Securities Regulation? Some Behavioral Observations Regarding Proposals for its Future, 51 DUKE L.J. 1397 (2002).
309. Matthew Josephson, Infrequent Corporation Reports Keep Investors in Dark, 36 MAG. OF WALL ST. 302, 374 (June 20, 1925).
310. Bernard Black, The Legal and Institutional Preconditions for Strong Securities Markets, 48 UCLA L. REV. 781, 783 (2001).
311. Bernard S. Black, Information Asymmetry, the Internet, and Securities Offerings, 2 J. SMALL & EMERGING BUS. L. 91, 92-93 (1998).
312. Roberta Romano, THE ADVANTAGE OF COMPETITIVE FEDERALISM FOR SECURITIES REGULATION (2002).
313. Gillian K. Hadfield & Eric L. Talley, On Public Versus Private Provision of Corporate Law 11, University of Southern California Law & Economics Research Paper No. 04-118 (2004).
314. William L. Cary, Federalism and Corporate Law: Reflections upon Delaware, 83 YALE L.J. 663 (1974).
315. David S. Ruder, Reconciling U.S. Disclosure Policy with International Accounting and Disclosure Standards, 17 NW. J. INT'L L. & BUS. 1, 10 (1996).
316. Marcel Kahan & Ehud Kamar, The Myth of State Competition in Corporate Law, 55 STAN. L. REV. 679, 687-88 (2002).
317. Robert Daines, The Incorporation Choices of IPO Firms, 77 N.Y.U. L. REV. 1559, 1562 (2002).
318. Klause Heine & Wolfgang Kerber, European Corporate Laws, Regulatory Competition and Path Dependence, 13 EUROPEAN J. LAW ECON. 47 (2002).
319. Eric Pan, Harmonization of U.S.-EU Securities Regulation: The Case for a Single European Securities Regulator, LAW & POLICY IN INT'L BUS (Winter 2003).
320. Mahoney and Pritchard have made the most persuasive cases for an increased role for securities exchanges in securities. Paul G. Mahoney, The Exchange as Regulator, 83 VA. L. REV. 1453 (1997)
321. Adam C. Pritchard, Markets as Monitors: A Proposal to Replace Class Actions with Exchanges as Securities Fraud Enforcers, 85 VA. L. REV. 925 (1999).
322. Albert B. Crenshaw, SEC to Toughen Rule on Option Plans, WASHINGTON POST, December 20, 2001, at E1.
323. Jenny Anderson, Should the Securities Industry Have Just One Set of Rules?, N.Y. TIMES, January 25, 2006, at C3.
324. Edward Rock, Securities Regulation as Lobster Trap: A Credible Commitment Theory of Mandatory Disclosure, 23 CARDOZO L. REV. 695, 697 (2002) (noting numerous limitations of the NYSE and other exchanges, especially an inability to impose criminal sentences).
325. Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 YALE L.J. 2359 (1998).
326. Frederick Tung, Lost in Translation: From U.S. Corporate Charter Competition to Issuer Choice in International Securities Regulation, 39 GA. L. REV. 525, 590-91 (2005).
327. One of the authors has addressed these matters in some detail. Robert A. Prentice, Regulatory Competition in Securities Law: A Dream (that Should Be) Deferred, 66 OHIO ST. L.J. 1155 (2005).
328. Lisa Bryant-Kutcher, Emma Yan Peng, & Kristina Zvinakis, Timeliness and Quality of 10-K Filings: The Impact of the Accelerated Filing Deadline (June 3, 2005). These authors found that the quality of filings did not diminish after the SEC shortened the deadline for filing 10-Ks from 90 days to 75 days, as critics had predicted. Therefore, under the new rules, investors were receiving just as reliable information in a timelier fashion.
329. Independent directors are those who are not officers, nor controlled by officers or controlling corporate shareholders.
330. Much of the blame in the major corporate scandals provoking SOX was placed at the feet of outside auditors, who approved fraudulent financial statements. The argument was that the auditors did so in order to preserve their more lucrative income received from providing consulting and other services to the very companies that they were auditing.
331. Sarbanes-Oxley Act, S. 304.
332. William W. Bratton & Joseph A. McCahery, The Equilibrium Content of Corporate Federalism 12 (October 2004), ECGI - Law Working Paper 23/2004, available at http//ssrn.com/abstract=606481.
333. William J. Carney, The Costs of Being Public After Sarbanes-Oxley: The Irony of Going Private 55 EMORY L.J. 141 (2006).
334. Larry E. Ribstein, Sarbanes-Oxley after Three Years, University of Illinois Law & Economics Research Papter No. LE05-016 378 (2005).
335. Stephen Brown, et al., Management Forecasts and Litigation Risk (April 2005), available at http://ssrn.com/abstract=709161.
336. www.afponline.org/pub/res/news/ns_20051229_cs.html.
337. Larry E. Rittenberg & Patricia K. Miller, Sarbanes-Oxley Section 404 Work: Looking at the Benefits, Institute of Internal Auditors. Research Foundation (November 9, 2005), available at www.theiia.org/?doc_id=5161.
338. Ivy Xiying Zhang, Economic Consequences of the Sarbanes-Oxley Act of 2002 (February 2005).
339. Haidan Li, Morton Pincus,& Sonja O.Rego, Market Reaction to Events Surrounding the Sarbanes-Oxley Act of 2002 (January 11, 2006).
340. Vidhi Chhaochharia & Yaniv Grinstein, Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules (June 2004).
341. Zabihollah Rezaee & Pankaj K. Jain, The Sarbanes-Oxley Act of 2002 and Security Market Behavior: Early Evidence (May 2005).
342. Pankaj K. Jain, Jang-Chul Kim, & Zabihollah Rezaee, The Effect of the Sarbanes-Oxley Act of 2002 on Market Liquidity (March 2004), available at http://ssrn.com/abstract=488142.
343. Gus De Franco, Yuyan Guan, & Hai Lu, The Wealth Change and Redistribution Effects of Sarbanes-Oxley Internal Control Disclosures (April 17, 2005), available at http://ssrn.com/abstract=706701.
344. Cynthia Harrington, The Value Proposition, J. ACCOUNTANCY, 77 (September 2005).
345. Stanley B. Block, The Latest Movement to Going Private: An Empirical Study, 14 J. APPLIED FIN. 36 (2004)
346. Peter C. Hsu, Going Private: A Response to an Increased Regulatory Burden?, UCLA School of Law-Econ. Research Paper No. 04-16 (May 2004).
347. Philip G. Berger, Feng Li, & M.H. Franco Wong, The Impact of Sarbanes-Oxley on Foreign Private Issuers (October 21, 2004).
348. Kate Litvak, The Effect of the Sarbanes-Oxley Act on Non-US Companies Cross-Listed in the U.S., U. of Texas Law and Econ. Research Paper No. 55 (December 22, 2005).
349. Pamela MacLean, "SOX" inspires Backlash-and Benefits, NAT'L L.J. (April 22, 2005).
350. Hollis Ashbaugh-Skaife, Daniel W. Collins, & William R. Kinney, Jr., The Discovery and Consequences of Internal Control Deficiencies Prior to SOX-Mandated Audits, McCombs Working Paper No. ACC-02-05 (September 15, 2005), available at http://ssrn.com/abstract=694681.
351. Kam C. Chan, Barbara R. Farrell, & Picheng Lee, Earnings Management and Return-Earnings Association of Firms Reporting Material Internal Control Weaknesses Under Section 404 of the Sarbanes-Oxley Act (June 2005), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=744806.
352. Gerald J. Lobo & Jian Zhou, Did Conservatism in Financial Reporting Increase after the Sarbanes-Oxley Act? Initial Evidence, 20 ACCT. HORIZONS 57 (2006).
353. Jeffrey T. Doyle, Ge Weili, Ge,& Sarah E. McVay, Accruals Quality and Internal Control over Financial Reporting, AAA 2006 Financial Accounting and Reporting Section (FARS) Meeting Paper (August 2005), available at http://ssrn.com/abstract=789985.
354. Jacqueline S. Hammersley, Linda A. Myers, & Catherine Shakespeare, Market Reactions to the Disclosure of Internal Control Weaknesses and to the Characteristics of those Weaknesses under Section 302 of the Sarbanes Oxley Act of 2002 (October 2005).
355. Gus De Franco, Yuyan Guan, and Hai Lu, The Wealth Change and Redistribution Effects of Sarbanes-Oxley Internal Control Disclosures (April 17, 2005) available at http://ssrn.com/abstract=706701.
356. Roberta Romano, The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 YALE L.J. 1521, 1542 (2005).
357. Paul A. Griffin & David H. Lont, Taking the Oath: Investor Response to SEC Certification Under Sarbanes-Oxley (April 30, 2004).
358. Pankav K. Jain, Jang-Chul Kim, & Zabihollah Rezaee, Have the Sarbanes-Oxley Act of 2002 and the CEO Certifications Made the Market Participants More Informed (January 2003).
359. Hsihui Chang, Jeng-Fang Chen, & Woody M. Liao, CEO's/CFO's Swearing by the Numbers: Does It Impact Share Price of the Firm? (October 2003).
360. Michael T. Burr, Corporations Caught in Rising Tide of FCPA Enforcement, CORPORATE LEGAL TIMES, November 2005, at 22.
361. April Klein, Audit Committee, Board of Director Characteristics, and Earnings Management,33J. ACCT. & ECON.375(2002)
362. Anup Agrawal & Sahiba Chadha, Corporate Governance and Accounting Scandals, 48 J. L. & ECON. 371 (October. 2005).
363. Mark S. Beasley, An Empirical Analysis of the Relations Between the Board of Director Composition and Financial Statement Fraud, 71 ACCT. REV. 443 (1996).
364. Sonda M.Chtourou, Jean Bedard, & Lucie Courteau, Corporate Governance and Earnings Management (April 21, 2001) available at http://ssrn.com.abstract=275053.
365. Lawrence J. Abbott, Susan Parker, & Gary F. Peters, Audit Committee Characteristics and Financial Misstatement: A Study of the Efficacy of Certain Blue Ribbon Committee Recommendations, 23 AUDITING: A J. OF PRAC. & THEORY 69 (March 2004).
366. Mark S. Beasley, et al., Fraudulent Financial Reporting: Consideration of Industry Traits and Corporate Governance Mechanisms, 14 ACCT. REV. 441 (2000).
367. Jennie Goodwin & Tech Yeow Yeo, Two Factors Affecting Internal Audit Independence and Objectivity: Evidence from Singapore, 5 INT'L J. AUDIT. 107, 116 (2001).
368. Jean Bedard, et al., The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management, 23 AUDITING: A J. OF PRAC. & THEORY 13 (September 2004).
369. Dorothy A. McMullen & K. Raghundan, Enhancing Audit Committee Effectiveness, 182 J. ACCTCY. 79 (August 1996).
370. Andrew J. Felo, et al., Audit Committee Characteristics and the Perceived Quality of Financial Reporting: An Empirical Analysis (April 2003), available at http://ssrn.com/abstract=401240.
371. Sonda M.Chtourou, Jean Bedard, & Lucie Courteau, Corporate Governance and Earnings Management (April 21, 2001), available at http://ssrn.com/abstract=275053.
372. Lawrence J. Abbot, et al., Audit Committee Characteristics and Financial Misstatement: A Study of the Efficacy of Certain Blue Ribbon Committee Recommendations, 23 AUDITING: A J. OF PRAC. & THEORY 69 (March 2004).
373. Jayanthi Krishnan, Audit Committee Quality and Internal Control: An Empirical Analysis, 80 ACCT. REV. 649 (2005).
374. Daniel A. Cohen, Aiyesha Dey, & Thomas Z. Lys, Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods (February 2005).
375. Bengt Holmstrom & Steven N. Kaplan, The State of U.S. Corporate Governance: What's Right and What's Wrong, NBER Working Paper No. 9613, 18 (April 2003).
376. Lina Saigol, Fewer Willing to Take Director Risk, FIN. ANCIAL TIMES, November 24, 2004, at 22.
377. Robert A. Prentice, The Inevitability of a Strong SEC, 91 CORNELL L. REV. 775 (forthcoming) (describing the popularity of American-style securities regulation in Asian and European nations).
378. Bengt Holmstrom & Steven N.Kaplan, The State of U.S. Corporate Governance: What's Right and What's Wrong, NBER Working Paper No. 9613 (April 2003) at Table 1.
379. Gerard Hertig, Convergence of Substantive Law and Enforcement, in CONVERGENCE AND PERSISTENCE IN CORPORATE GOVERNANCE 33, 53 (Jeffrey N. Gordon & Mark J. Roe eds. 2004).