|
on Law and Economics |
| By: | Patricia Charléty; Marie-Cécile Fagart; Saïd Souam |
| Abstract: | This paper characterizes the equilibria of a costly voting game in which shareholders heterogeneous in both size and preferences strategically vote for or against a proposed resolution or withhold. It is shown that a minimum quorum generates (1) equilibria in which one or several shareholders form voting coalitions in favor of the resolution that is adopted (2) an equilibrium in which shareholders strategically abstain from voting and the resolution is rejected. The size of blockholders and their preferences (in favor or against the resolution) play a crucial role in the existence of equilibria, their nature, the size and the number of voters in coalitions. We derive conditions under which the dominant shareholder controls the meeting. We also examine how large shareholders influence the result of the vote. In particular, we analyze the interaction between blockholders and discuss the situations in which large shareholders jointly control annual meetings or form coalitions to counter the dominant shareholder. |
| Keywords: | Shareholder Meeting, Strategic voting, Coalitions, Quorum rule, Dominant, Controlling and Reference shareholders. |
| JEL: | D72 G34 K20 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-35&r=law |
| By: | Chen, Yongmin; Li, Jianpei; Zhang, Jin |
| Abstract: | We study the role of liability in disciplining an expert's behavior in a credence good market. The expert, who can provide two potential treatments for a consumer's problem, may misbehave in two ways: prescribing the "wrong" treatment given his private information, or failing to exert proper effort to diagnose the problem. We show that under a range of liability rules, the expert will choose the efficient treatment based on his information if the price margins for the two treatments are close enough. Moreover, a well-designed liability rule can motivate the expert to choose efficiently both the treatment and the diagnosis effort. This efficiency result continues to hold when the expert's diagnosis effort generates only a noisy signal about the nature of the consumer's problem, provided the signal is sufficiently informative. |
| Keywords: | Credence goods, private information, diagnosis effort, undertreatment, overtreatment, liability |
| JEL: | D82 I18 K13 L23 |
| Date: | 2017–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80206&r=law |
| By: | Antonio Accetturo (Bank of Italy); Matteo Bugamelli (Bank of Italy); Andrea Lamorgese (Bank of Italy) |
| Abstract: | Does tougher law enforcement positively affect political participation? This paper addresses this question, which hinges upon the causal impact of formal institutions on informal ones, by using a historical event from 19th century Italy. This event was the Pica Law, which was introduced in 1863 to fight a surge of criminal violence in Southern Italy and to ensure a safer environment for wealthy people, the only ones allowed to vote at that time. Our main finding, obtained using a spatial regression discontinuity technique in a diff-in-diffs framework, is that voter turnout greatly increased in those areas where the Pica Law was applied, compared with bordering and otherwise similar areas. This result is confirmed by a number of robustness checks and placebo exercises and turns out to be persistent over time. |
| Keywords: | turnout, electoral results, spatial discontinuity |
| JEL: | D72 R5 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1124_17&r=law |
| By: | Burkart, Mike; Miglietta, Salvatore; Ostergaard, Charlotte |
| Abstract: | We study how owners trade off the costs and benefits of establishing a board in a historical setting, where boards are optional and authority over corporate decisions can be freely allocated across the general meeting, the board, and management. We find that informed owners and boards are substitutes, and that boards exist in firms most prone to collective action problems. Boards monitor, advise, and mediate among shareholders, and these different roles entail different allocations of authority. Boards also arise to balance the need for small shareholder protection with the need to curb managerial discretion. |
| Keywords: | authority allocation; Boards; corporate governance; private contracting |
| JEL: | D23 G3 K2 N80 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12147&r=law |
| By: | Ozkan Eren; Naci Mocan |
| Abstract: | This paper contributes to the debate on the impact of juvenile punishment on adult criminal recidivism and high school completion. We link the universe of case files of those who were convicted of a crime as a juvenile between 1996 and 2012 in a southern U.S. state to the public school administrative records and to adult criminal records. The detail of the data allows us to utilize information on the exact types of crimes committed, as well as the type and duration of punishment imposed, both as a juvenile and as an adult. We exploit random assignment of cases to judges and use idiosyncratic judge stringency in imprisonment to estimate the causal effect of incarceration on adult crime and on high school completion. Incarceration has a detrimental impact on high school completion for earlier cohorts, but it has no impact on later cohorts, arguably because of the school reform implemented in the state in the late 1990s. We find that incarceration as a juvenile has no impact on future violent crime, but it lowers the propensity to commit property crime. Juvenile incarceration increases the propensity of being convicted for a drug offense in adulthood, but this effect is largely driven by time spent in prison as a juvenile. Specifically, juvenile incarceration has no statistically significant impact on adult drug offenses if time spent in prison is less than the median, but longer incarceration increases adult drug conviction, arguably because longer prison stays intensify emotional stress, leading to drug use. |
| JEL: | I2 K40 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23573&r=law |
| By: | Campello, Murillo; Ferrés, Daniel; Ormazabal, Gaizka |
| Abstract: | Stock market reactions to news of cartel prosecutions are muted when indicted firms have a high proportion of independent directors on their boards. This finding is robust to self-selection and is pronounced when independent directors hold more outside directorships and fewer stock options -when those directors have fewer economic ties to indicted firms. Results are even stronger when independent directors' appointments were attributable to SOX, preceded their CEO's own appointment, or followed class action suits|when directors have fewer ties to indicted CEOs. Independent directors serving on indicted firms are penalized by losing board seats and vote support in other firms. Firms with more independent directors are more likely to cooperate with antitrust authorities through leniency programs. They are also more likely to dismiss scandal-laden CEOs after public indictments. Our results show that cartel prosecution imposes significant personal costs onto independent directors and that they take actions to mitigate those costs. We argue that understanding these incentive-compatible dynamics is key in designing strategies for cartel detection and prosecution. |
| Keywords: | Cartel Prosecution; Antitrust Policy; Leniency Programs; Independent Directors; |
| JEL: | G30 K21 L41 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12143&r=law |
| By: | V. Bhaskar; Robin Linacre; Stephen Machin |
| Abstract: | The economic functioning of online drug markets using data scraped from online platforms is studied. Analysis of over 1.5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that, a priori, one might think would plague them. Only a small proportion of online drugs deals receive bad ratings from buyers, and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs. Furthermore, as with legal online markets, the market penalizes bad ratings, which subsequently lead to significant sales reductions and to market exit. The impact of the well-known seizure by law enforcement of the original Silk Road and the shutdown of Silk Road 2.0 are also studied, together with the exit scam of the market leader at the time, Evolution. There is no evidence that these exits deterred buyers or sellers from online drugs trading, as new platforms rapidly replaced those taken down, with the online market for drugs continuing to grow. |
| Keywords: | dark web, drugs |
| JEL: | K42 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1490&r=law |
| By: | Sophie Harnay; Elisabeth Tovar |
| Abstract: | In this paper, we study whether individual normative preferences are affected by the knowledge of collective normative preferences. In a questionnaire-experimental framework, we study whether respondents obey, resist or are indifferent to a very unfair but legal distribution of an inheritance between a minimum wage-earner and a millionaire. In addition to regressions, we use classification trees and random forests to provide a full picture of how asymmetric combinations of self-interest and ideological factors may lead to identical individual redistributive preferences and law internalization attitudes. We find that sensitivity to procedural fairness and responsibility cut opinions are good predictors of individual redistributive preferences. We also find that law internalization is associated with the support of core normative values, but not with the support of fairness as procedures. This echoes Cooter’s hypothesis of ‘meta preferences’ triggering an expressive vs. backlash effects of laws. Lastly, we find that, among the law-sensitive, the social ‘losers’ tend to submit to the unfair but legal collective preference while the social ‘winners’ tend to either be indifferent of voice their disagreement. |
| Keywords: | redistribution, law expressivity, self-interest, ideology, classification trees, random forests. |
| JEL: | C45 C88 D63 H30 K10 Z13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-34&r=law |
| By: | Shekhar, Shiva; Wey, Christian |
| Abstract: | We examine the competitive effects of a passive partial ownership (PPO) when it serves as an instrument for the acquirer firm to learn the merger synergies with the target firm in advance. The realization of a synergy is uncertain ex ante, so that a direct merger exhibits a downside risk not only for the merging candidates but also for consumers. We show that minority shareholdings can reduce this downside risk as they allow for a sequential takeover where the acquirer takes an initial minority share, becomes an insider, and learns the merger synergy. We show how this feature of PPOs affects a firm's takeover strategy and the decision problem of the antitrust authority. We derive implications for a merger control approach to PPO acquisitions, where we examine a forward looking price test and a safeharbor rule. |
| Keywords: | Merger Control,Passive Partial Ownership,Synergies |
| JEL: | L13 L41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:260&r=law |
| By: | Anheier, Helmut K. |
| Abstract: | The roles of non-governmental or civil society organizations have become more complex, especially in the context of changing relationships with nation states and the international community. In many instances, state-civil society relations have worsened, leading experts to speak of a "shrinking space" for civil society nationally as well as internationally. The author proposes to initiate a process for the establishment of an independent high-level commission of eminent persons (i) to examine the changing policy environment for civil society organizations in many countries as well as internationally, (ii) to review the reasons behind the shrinking space civil society encounters in some parts of the world and its steady development in others, and (iii) to make concrete proposals for how the state and the international system on the one hand and civil society on the other hand can relate in productive ways in national and multilateral contexts. |
| Keywords: | civil society,NGOs,G20 |
| JEL: | F5 L31 H7 K33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201745&r=law |
| By: | Emma Galli; Ilde Rizzo; Carla Scaglioni |
| Abstract: | In this paper, we aim at evaluating from an economic perspective the recent Italian legislation on transparency to investigate whether the potentialities of transparency as a tool to improve performance and integrity are fully exploited. We first construct a synthetic indicator (CTI) consisting of two sub-indicators, CTI Integrity and CTI Performance, which are able to describe in numerical terms the overall degree of transparency of Italian public administrations as well as the two different aspects of the public activity’s transparency. Then, using as a sample of Italian municipalities, we address the question whether there is a relation between the fulfillment of transparency obligations and both the institutional quality and the performance of the public administration activity. Our preliminary results suggest that our transparency indicators show a satisfactory correlation with widely used measures of the quality of institutions as well as with the official data on municipalities public spending performance. Key Words: Transparency, quality of institutions, local governments, accountability, performance. |
| JEL: | K2 K4 H3 H7 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp112017&r=law |