Financial regulation should be countercyclical, strengthening during speculative booms to contain excessive leverage and loosening following crises so as to not limit credit extension in hard times. And yet, financial regulation in fact tends to be procyclical, strengthening following crises and...

This Essay discusses two historical parallels between the current financial crisis and the financial crisis of the late 1920s and 1930s. First, financial innovation was at the core of both crises. In particular, the machinations of Ivar Kreuger illuminate how financial innovation tends to...

This paper proposes a new regulatory approach that implements capital requirements contingent on managerial compensation. We argue that excessive risk taking in the financial sector originates from the shareholder moral hazard created by government guarantees rather than from corporate...

A belief that markets are efficient is blamed for instigating the crisis we are in and lulling us into complacency as the crisis was approaching. But the debate about the role of such belief in the crisis is unfocused for two reasons. First, a lack of a common definition of market efficiency...

We develop a model of a firm in financial distress. Distress can be mitigated by filing for bankruptcy, which is costly, or preempted by restructuring, which is impeded by a collective action problem. We find that bankruptcy and restructuring are complements, not substitutes: Reducing bankruptcy...

We investigate if prior professional legal education either restrains or increases the extent to which the insider trades of company executives and directors are informed. We show that executives and directors with legal expertise (lawyer-insiders) earn significantly lower abnormal returns than...

This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. We exploit this...

Pothers about liability risks for company directors and officers are nothing new in corporate law. The global financial crisis, however, created a unique and unfamiliar commercial matrix in which such concerns were played out. Although Australia fared better than many jurisdictions during the...