In the first half of the twentieth century, the UK capital markets were marked by an absence of investor protection; by the end of the century, there was more extensive protection there than virtually anywhere else in the world. The UK therefore provides an exceptional laboratory for evaluating...

We present a model of quantitative trading as an automated system under human supervision. Contrary to previous literature we show that price-contingent trading is the profitable equilibrium strategy of large rational agents in efficient markets. The key ingredient is uncertainty about whether a...

We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks...

Are courts effective monitors of corporate decisions? In a controversial landmark case, the Delaware Supreme Court held directors personally liable for breaching their fiduciary duties, signaling a sharp increase in Delaware’s scrutiny over corporate decisions. In our event study, low-growth...

Previous studies of voting on acquisitions are inconclusive because shareholder approval in the United States is discretionary for management. We study the U.K. where approval is mandatory for deals that exceed a multivariate relative size threshold. We find that in the U.K. shareholders gain 8...

We build a model where sovereign defaults weaken banks’ balance sheets because banks hold sovereign bonds, causing private credit to decline. Stronger financial institutions boost default costs by amplifying these balance-sheet effects. This yields a novel complementarity between public debt...

This Paper studies the determinants of mergers and acquisitions around the world during the 1990s by focusing on differences in laws and regulation across countries. We find that the volume of M&A activity and the premium paid are significantly larger in countries with better investor...

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We...

Economic theory points to five parties active in disciplining management of poorly performing firms: holders of large share blocks, acquirers of new blocks, bidders in take-overs, non-executive directors, and investors during periods of financial distress. This Paper reports the first...

This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms’ technologies and technological specialization of countries in the context...