Governance externalities from mandatory disclosure regulation

Supreme Court Justice Louis Brandeis famously proclaimed in 1914 that “sunlight is the best of disinfectants.” Today, scholars, policymakers, and regulators commonly hold a related belief that mandatory disclosures can improve markets’ transparency and effectiveness. Typically, these thinkers believe disclosure-based regulation is superior to rules-based alternatives (e.g., Dalley 2007; Etzioni, 2010). The advantage of a disclosure-based approach over […]

Climate Change Risk and the Costs of Mortgage Credit

A new challenge: pricing climate risks  In recent remarks, financial regulators across the globe have stressed the importance of understanding the effect of climate risks on the financial system. In a statement released on November 9, 2020, Governor Lael Brainard of the U.S. Federal Reserve stressed the importance of lenders’ abilities to identify and measure the risks posed by climate change. In particular, she emphasizes the importance of moving “from […]

Burning Down the House: How Inadequate Climate Risk Disclosures and Information Asymmetries Threaten to Disrupt the U.S. Mortgage Market

This post first appeared on the Climate Risk Disclosure Lab’s website.  The physical effects of climate change are wreaking havoc across the United States as extreme weather events are increasing in severity and frequency. The 2020 summer wildfires in the western U.S. broke “almost every record there is to break,” and there has been a notable […]

Regulatory Enforcement in OTC Markets

Regulatory enforcement in over-the-counter (OTC) markets presents a unique challenge. Enforcement efforts by the Securities and Exchange Commission (SEC) among exchange-listed companies are facilitated by companies’ provision of audited financial statements and other extensive disclosures. Sophisticated investors and financial intermediaries, such as analysts and credit rating agencies, supplement the SEC’s monitoring efforts by reviewing corporate […]

The Source(s) of Corporate Harm

How do corporations cause harm? Courts and legislatures have long subscribed to a simple, straightforward approach: “[T]he corporation touches the public only by the hands of [its] agents and servants.” In other words, according to the law, there is ultimately only one source of corporate harm: individual employees.   In a forthcoming article, I urge reconsideration of that centuries-old legal assumption. The law’s approach would surprise many non-lawyers […]

Scoping and Defining Financial Inclusion, Access to Credit, and Sustainable Finance

The World Bank, for example, defines financial inclusion as encompassing access to credit and sustainable finance. Other definitions of financial inclusion are circular or conclusory. Writers on sustainable finance also conflate the terms with the environmental, social, and governance (ESG) movement in corporate law or the United Nations’ Sustainable Development Goals. This symposium article scopes […]

CEO-to-employee pay ratio and CEO diversity

Concerns about income inequality and supposed CEO rent extraction motivated the enaction of Section 953(b) of Dodd-Frank Act. The SEC issued new rules to implement 953(b) in 2015 and they became effective in 2017.  The rules require public companies to disclose their median employee pay and its ratio to CEO pay. The CEO-to-employee pay ratio increased 1000% in the last 40 years according to Economic Policy Institute, […]

Continuing Uncertainty After Colorado Compromise: The Limited Impact of the Avant-Marlette Settlement on True Lender Risk for Nonbank-Bank Partnerships

In August 2020, two nonbank fintechs—Avant and Marlette Funding—and their partner banks— WebBank and Cross River Bank—reached a “landmark settlement” with Colorado regulators (the “Settlement”) to determine who is the “true lender” of loans originated under their partnerships. Under the Settlement, the nonbank-bank partnerships are permissible under Colorado law, provided that they comply with the terms of a Safe Harbor that is […]

Is There a Value Premium in Cryptoasset Markets?

Cryptoasset markets have experienced a paradigm shift over the past decade: originally regarded as a purely speculative investment, institutional investors are starting to appreciate cryptoassets’ unique return drivers. As of 2020, 45% of institutional investors in Europe and 27% in the US  have exposure to cryptoassets, either directly or via futures contracts. Despite considerable interest in this evolving asset class, the question of what factors drive expected returns in cryptoassets remains largely unexplored.   On the one hand, Cheah and Fry (2015) argue that Bitcoin […]

Crackdown on Tax Avoidance Could Impede Corporate Innovation

Corporate tax avoidance has significantly increased at both the state and federal level over the past three decades. As an important tax avoidance strategy, U.S. firms extensively use intangible assets to shift taxable income from high-tax areas to low-tax areas to reduce income taxes. Therefore, patents and other intangible assets create significant tax benefits for firms.   Governments […]