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on Law and Economics |
| By: | Jens-Uwe Franck; Till Seyer |
| Abstract: | If an antitrust fine has been imposed on a company, the question of managerial recourse liability arises. We present court cases from the Netherlands, the UK, and Germany, in part denying managerial liability and claiming that it would undermine the fines’ deterrent effect. We analyse whether managerial liability should be limited or banned to prevent, on the one hand, the company or its shareholders being under-deterred or, on the other hand, the company’s management being over-deterred. Regarding the former, we argue that a ban of managerial liability – which would have to be accompanied by a ban on any other type of internal financial sanction – would take an indispensable governance instrument out of the hands of shareholders. This holds true despite the availability of D&O insurance. Regarding the latter, we identify risks of overdeterrence but also see mitigating mechanisms at work. We conclude that, while a restriction on managerial liability may be regarded a reasonable measure, this should be viewed as lying within the discretion of company law legislation and jurisprudence but not as a mandatory implication of antitrust fining laws. |
| Keywords: | antitrust law, cartels, antitrust fines, deterrence, managerial liability, antitrust compliance, D&O insurance, EU law, principle of effectiveness |
| JEL: | K21 K22 K42 L40 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_429&r=law |
| By: | Anna Laura Baraldi (Department of Economics, University of Campania); Erasmo Pagani (Department of Law, University of Naples Federico II); Marco Stimolo (Department of Economic and Social Sciences, Università Politecnica delle Marche) |
| Abstract: | Organised crime tightens its corrupting influence on politics through violent intimidation. Anti-crime measures that increase the cost of corruption but not of the exercise of violence might accordingly lead mafia-style organizations to retaliate by resorting to violence in lieu of bribery. On the other hand, this kind of anti-crime measure might also induce criminal clans to go inactive, owing to the lower expected payoff from the “business” of influencing politics, which would reduce violence. To determine which of these possible effects is prevalent, we undertake an empirical assessment of the impact of city council dissolution for mafia influence in Italy as prescribed by Decree Law 164/1991 in discouraging violence against politicians in the period 2010-2019. Our difference-in-differences analysis shows that in the dissolved municipalities the enforcement of the Law reduces violence and that the effect persists (at least) for two electoral rounds. The most likely driving channel of this result is the renewed pool of politicians elected after compulsory administration. These findings are robust to a series of endogeneity tests. |
| Keywords: | Organized Crime, Violence, Anti-corruption measures, Spillovers |
| JEL: | C25 D73 D78 I38 K42 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2023.10&r=law |
| By: | Pattison, Nathaniel (Southern Methodist University); Millimet, Daniel L. (Southern Methodist University) |
| Abstract: | The importance of place of birth or residence on a host of economic outcomes cannot be overstated. The treatment of households in consumer bankruptcy appears to be no different. Despite the U.S. Bankruptcy Code being federal law, there is extreme geographic variation in the relative use of the two types of consumer bankruptcy – Chapter 7 and Chapter 13 – and these differences lead to disparities in bankruptcy's balance between debt relief and creditor repayment. Guided by the legal literature, we develop a framework to decompose the geographic variation into three potential sources: (i) differences in filer characteristics, (ii) differences in how courts steer filers based on those characteristics, and (iii) differences in how frequently filers deviate from court steering. The results reveal that heterogeneity surrounding a single characteristic, disposable income, explains most of the geographic variation in chapter choice. Moreover, we show that disposable income plays an important and overlooked role in screening within the bankruptcy system, and we discuss the legal mechanisms behind this screening. Finally, we explore the consequences of improving uniformity in the bankruptcy system. |
| Keywords: | bankruptcy, chapter choice, regional disparities |
| JEL: | D31 G28 G51 R59 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16105&r=law |
| By: | Nigar Hashimzade |
| Abstract: | Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with certainty. Furthermore, a tax dispute can lead to a net welfare gain despite the litigation costs. Thus, tax uncertainty and tax disputes can be socially desirable. |
| Keywords: | tax uncertainty, tax shelter, tax avoidance, rent-seeking |
| JEL: | K34 H26 D72 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10392&r=law |
| By: | Mario Bernasconi; Miguel Espinosa; Rocco Macchiavello; Carlos Suarez |
| Abstract: | Under collusion, firms deviate from current profit maximization in anticipation of future rewards. As current profit maximization places little restrictions on firms’ pricing behaviour, collusive conduct is hard to infer. We show that bids from certain firms in the Colombian wholesale electricity market collapsed immediately after the announcement, and before the implementation, of a reform that potentially made collusion harder to sustain. After ruling out confounders, we uncover how the cartel functioned and how firms may have communicated. Calibrating the dynamic enforcement constraint confirms that collusion was sustainable before, but not after, the reform. The conclusions discuss policy implications. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10384&r=law |
| By: | Delgado-Cubillo, Pablo; Martín Román, Ángel L. |
| Abstract: | While the 1995 Occupational Safety and Health Act (OSH) regulation transformed the outlook on workplaces in Spain, characterized by a lack of preventive protection, public statistics have reported an increasing trend in the postregulation workplace accident rates. This study uses microdata from official national statistics to examine the effect of the OSH regulation on the reported accidents while focusing on its severity. Accordingly, we apply a difference-in-difference assessment method where a comparable group is formed by the contemporaneous in itinere accidents (commuting), which are legally and statistically considered work-related accidents but not directly impacted by the OSH regulation, with a focus on the workplace environment. The results reveal that the nonfatal accident rate decreased after the implementation of the regulation. However, when we isolate the effect of the regulation on accidents that usually provoke hard-to-diagnose injuries (dislocations, back pain, sprains, and strains), we obtain a significant increase in the accident rate. Moral hazard mixed effects seem to have played a crucial role in these dynamics through overreporting and/or Peltzman effects, often offsetting accident reduction intended by the OSH regulation. |
| Keywords: | OSH, impact evaluation, moral hazard, difference-in-difference |
| JEL: | K31 I18 D04 H43 J28 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1277&r=law |
| By: | Gözlügöl, Alperen A.; Greth, Julian; Tröger, Tobias |
| Abstract: | We contribute to the debate about the future of capital markets and corporate finance, which has ensued against the background of a significant boom in private markets and a corresponding decline in the number of firms and the amount of capital raised in public markets in the US and Europe. Our research sheds light on the fluctuating significance of public and private markets for corporate finance over time, and challenges the conventional view of a linear progression from one market to the other. We argue instead that a more complex pattern of interaction between public and private markets emerges, after taking a long-term perspective and examining historical developments more closely. We claim that there is a dynamic divide between these markets, and identify certain factors that determine the degree to which investors, capital, and companies gravitate more towards one market than the other. However, in response to the status quo, other factors will gain momentum and favor the respective other market, leading to a new (unstable) equilibrium. Hence, we observe the oscillating domains of public and private markets over time. While these oscillations imply 'competition' between these markets, we unravel the complementarities between them, which also militate against a secular trend towards one market. Finally, we examine the role of regulation in this dynamic divide as well as some policy implications arising from our findings. |
| Keywords: | corporate finance, capital markets, public markets, private markets, private equity, securities regulation, financial regulation |
| JEL: | D53 G1 G3 K22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:384&r=law |
| By: | Campa, Pamela; Muehlenbachs, Lucija (Resources for the Future) |
| Abstract: | In US environmental court cases, a cash penalty can be mitigated if a defendant volunteers to undertake an in-kind project, such as retrofitting school buses or building a public park. A goal of the policy is to address environmental justice concerns for low-income and minority populations, yet the historical record shows that in-kind settlements are most likely to occur in cases involving high-income, majority-white communities. A choice experiment reveals the public prefers in-kind settlements over cash, and a randomized survey reveals that in-kind settlements improve the public’s view of a violating firm, consistent with our finding of positive stock-market reactions to in-kind settlements. |
| Date: | 2023–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-23-21&r=law |
| By: | Atsuko Suzuki (Graduate School of Economics, Osaka University) |
| Abstract: | The most famous business method of the prominent kimono merchant Mitsui Echigoya in early modern Japan was a cash business without interest through store sales. Although the actual interest rates of the time have remained unknown to date, Echigoya's cash business was just one of their business methods, and a substantial portion of their business was composed of credit sales, in which prices varied according to the interest period. This study aimed to reveal these interest rates. To this end, we investigated Echigoya's new business method established in the Kyoho period (1719), called "Koban Rokuju-me no Kakeho, " which was a double-price tag sales method that used the multiplication table based on the fixed exchange rate of 60 momme of silver to 1 ryo of gold Koban. This particular business method is neither well known nor well understood and the present study is the first to successfully elucidate it in detail. As a result of determining the specific calculation method, the various interest rates of items sold by Echigoya were identified. The socioeconomic situation of early modern Japan was also revealed, such as the fixed exchange rate system of the Edo commodity market and the hyperinflation that occurred immediately after the enforcement of the Kyoho law of 1718 that ordered the correct exchange rates according to the quality of various recoinage coins. These findings are significant discoveries in the early modern economic history of Japan. This study enabled a deeper understanding of early modern Japan's socioeconomic situation through the comprehensive elucidation of Echigoya's business styles, which helped them survive difficult times by introducing the double-price tag sales strategy in response to the chaotic monetary policy of the shogunate. |
| Keywords: | history of money, inflation and deflation, early modern Japan, pricing strategies, Mitsui Echigoya. |
| JEL: | D46 E31 K42 N15 Z13 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2306&r=law |
| By: | Aitzaz Ahsan Alias Sarang (Iqra University); Nicolas Aubert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon); Xavier Hollandts (Kedge BS - Kedge Business School) |
| Abstract: | This study examines the relationship between women directors and the cost of equity (COE). Investigating the French firm's sample, we find a significant negative effect of women directors on the cost of equity. Our results also document that the effect of women directors on reducing the cost of equity is significant for firms that have a critical mass of at least four women directors. Using the difference-in-difference (DID) and propensity score matching (PSM) approach, we find that the relationship between female directors and lower equity costs is significant for the period following the Copé–Zimmermann gender quota law. The results show that women directors' presence on corporate boards is also supported by economic reasons. The study provides implications in relation to the Copé–Zimmermann law in France. |
| Keywords: | Cost of Equity, Gender Quota Laws, Critical Mass, Women on Corporate Boards |
| Date: | 2025–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03875465&r=law |
| By: | Jonas Tallberg; Magnus Lundgren; Johannes Geith |
| Abstract: | As the development and use of artificial intelligence (AI) continues to grow, policymakers are increasingly grappling with the question of how to regulate this technology. The most far-reaching international initiative is the European Union (EU) AI Act, which aims to establish the first comprehensive framework for regulating AI. In this article, we offer the first systematic analysis of non-state actor preferences toward international regulation of AI, focusing on the case of the EU AI Act. Theoretically, we develop an argument about the regulatory preferences of business actors and other non-state actors under varying conditions of AI sector competitiveness. Empirically, we test these expectations using data on non-state actor preferences from public consultations on European AI regulation. Our findings are threefold. First, all types of non-state actors express concerns about AI and support regulation in some form. Second, there are nonetheless significant differences across actor types, with business actors being less concerned about the downsides of AI and more in favor of lax regulation than other non-state actors. Third, these differences are more pronounced in countries with stronger commercial AI sectors than in countries with lesser developed AI sectors. Our findings shed new light on non-state actor preferences toward AI regulation and point to challenges for policymakers having to balance competing interests. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.11523&r=law |
| By: | Sweeney, Richard L. |
| Abstract: | The 1990 Clean Air Act Amendments imposed extensive restrictions on refined petroleum product markets, requiring select end users to purchase new cleaner versions of gasoline and diesel. I estimate the impact of this intervention on refining costs, product prices and consumer welfare. Isolating these effects is complicated by several challenges likely to appear in other regulatory settings, including overlap between regulated and non-regulated markets and deviations from perfect competition. Using a rich database of refinery operations, I estimate a structural model that incorporates each of these dimensions, and then use this cost structure to simulate policy counterfactuals. I find that the policies increased gasoline production costs by 7 cents per gallon and diesel costs by 3 cents per gallon on average, although these costs varied considerably across refineries. As a result of these restrictions, consumers in regulated markets experienced welfare losses on the order of $3.7 billion per year, but this welfare loss was partially offset by gains of $1.5 billion dollars per year among consumers in markets not subject to regulation. The results highlight the importance of accounting for imperfect competition and market spillovers when assessing the cost of environmental regulation. |
| Date: | 2023–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-23-19&r=law |
| By: | Leuz, Christian; Malani, Anup; Muhn, Maximilian; Jakab, László |
| Abstract: | Financial ties between drug companies and medical researchers are thought to bias results published in medical journals. To enable readers to account for such bias, most medical journals require authors to disclose potential conflicts of interest. For such policies to be effective, conflict disclosure must modify readers' beliefs. We therefore examine whether disclosure of financial ties with industry reduces article citations, indicating a discount. A challenge to estimating this effect is selection as drug companies may seek out higher quality authors as consultants or fund their studies, generating a positive correlation between disclosed conflicts and citations. Our analysis confirms this positive association. Including observable controls for article and author quality attenuates but does not eliminate this relation. To tease out whether other researchers discount articles with conflicts, we perform three tests. First, we show that the positive association is weaker for review articles, which are more susceptible to bias. Second, we examine article recommendations to family physicians by medical experts, who choose from articles that are a priori more homogenous in quality. Here, we find a significantly negative association between disclosure and expert recommendations, consistent with discounting. Third, we conduct an analysis within author and article, exploiting journal policy changes that result in conflict disclosure by an author. We examine the effect of this disclosure on citations to a previously published article by the same author. This analysis reveals a negative citation effect. Overall, we find evidence that disclosures negatively affect citations, consistent with the notion that other researchers discount articles with disclosed conflicts. |
| Keywords: | Financial interests, Bias in medical research, Research and development, Disclosure regulation, Transparency |
| JEL: | D83 D84 G18 K20 L51 M40 O31 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:702&r=law |
| By: | Ana Maria Santacreu; Michael Sposi; Jing Zhang |
| Abstract: | We develop a structural framework to identify the sources of cross-state heterogeneity in response to U.S. tariff changes. We quantify the effects of unilaterally increasing U.S. tariffs by 25 percentage points across sectors. Welfare changes range from –0.8 percent in Oregon to 2.1 percent in Montana. States gain more when their sectoral comparative advantage covaries negatively with that of the aggregate U.S. Consequently, “preferred” changes in tariffs vary systematically across states, indicating the importance of transfers in aligning state preferences over trade policy. Foreign retaliation substantially reduces the gains across states while perpetuating the cross-state variation. |
| Keywords: | Interstate trade; Gains from Trade; Customs Union |
| JEL: | F11 F62 |
| Date: | 2023–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:95977&r=law |
| By: | Martin Palovic |
| Abstract: | Market-based redispatch is efficient in short-run but provides perverse long-run incentives. This paper explains such incentives by distribution effects of the tool. Therefore, market-based redispatch is conceptualized as a Coasean bargaining about network capacity. This allows altering distribution effects without impeding the short-term efficiency. Two design adjustments are derived. First, long run incremental cost is introduced next to market-based redispatch, as in the UK. Perverse incentives are removed but the long-run optimum is missed. Second, interruptible network connections with secondary market, known from the gas sector, replace market-based redispatch. This solution is efficient in the short- and long-run. |
| Keywords: | market based redispatch, distribution effects, |
| JEL: | D42 K23 L51 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bei:00bewp:0041&r=law |