Law and Finance

This website aims to assemble the glossary explanation, key excerpts from the influential cases and papers, and as a whole to organize the knowledge of law and finance (especially, the interdisciplinary realm of law and finance). The subjects includes Agency Cost (traditionally, in finance domain but lots of work were done from law point of view), takeover defense? (traditionally, in law domain, but works of scholarship focused on the price changed after the release of deals).

The topics are categorized in order of importance (from my point of view) as follows. If you prefer to view in alphabetical order, it is also available.

Agency Cost †

Perhaps, the most important (as well as contentious, addictive) topics in the field of law and finance) would be Agency Cost (from pure finance point of view, the most important topic would be Efficient Capital Market Hypothesis and from pure law point of view, it would be state competition?. Further, for law and finance, asymmetric information would be soon dominant research topic*1.

Agency Cost consists of (1) monitoring costs, (2) bonding costs and (3) residual loss, and are borne by agents in the complete competitive market.

Efficient Capital Market Hypothesis †

Lawyers tend to be satisfied when they understand all of the Delaware corporate laws and cases. The missing point is to understand what happens in real world, and most important point in the real world is based on largely whether the market is efficient. I tried to assemble the materials both supports weak form of efficiency and some part of semi-strong form of efficiency, and tried to collect some recent scholarship regarding the behavioral finance to present the partly inefficient market.

Asymmetric Information †

The study of asymmetric information began when Kenneth J. Arrow, economist, first presented an asymmetric information problem in medical care situation. Later, this idea was developed by George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz and fructified their winning of the Nobel Economics prize. In the meantime, the idea of asymmetric information was adopted to various topics in law (from contract negotiation to management buyout).

Valuation †

Valuation sometimes seems a pure finance topic. However, I believe that the valuation is an essential tool to measure various corporate decision whether the directors should go for. I would like to pick two connections between law and finance. First, I present a topic regarding value enhancing merger and value, then the valuation and Delaware laws (and cases).

Securities Market? †

Takeover Market †

Leveraged Buyout? †

Corporate Bonds †

Takeover Defense †

Poison Pill? †

Game Theory †

Game Theory at Stanford Encyclopedia of Philosophy

Prisoners' Dilemma †

Capital Structure †

Modigliani and Miller Theory †

Leverage and Choice of Capital Structure †

Amihud, Garbade & Kahan, A New Governance Structure for Corporate Bonds?, 51 Stan. L. Rev. 447? (1998-1999) †

Securities Law? †

Venture Capital †