Invited speakers: Abraham L. Wickelgren (University of Texas Texas Law School), Anup Malani (University of Chicago Law School) and two internal speakers. Location: Oostindisch Huis (VOC-room E0.02)
15:00 – 16:30
Chair: Giuseppe Dari-Mattiacci (ACLE).
Anup Malani (University of Chicago Law School): Does Accuracy Improve the Information Value of Trials? (with: Scott A. Baker, Washington University in St. Louis).
Carmine Guerriero (ACLE): Endogenous Property Rights. (with: Giuseppe Dari-Mattiacci, ACLE).
16:30 – 17:00
17:00 – 18:30
Chair: Maarten Pieter Schinkel (ACLE)
Abraham L. Wickelgren (University of Texas Law School): Learning and Settlement with Endogenous Sequential Litigation.
Margherita Saraceno (ACLE): Can Shareholder Litigation Discipline CEO Bonuses in the Financial Sector? The Role of Securities Class Actions. (with: Lucia Dalla Pellegrina, University of Milano-Bicocca).
Format: To each paper are assigned 45 minutes—i.e., 30 for the speaker, 15 for the floor.
Please confirm your attendance to this meeting by firstname.lastname@example.org .
Judicial Learning and the Quality of Legal Rules (Joint with: Scott A. Baker, Washington University in St.Louis)
We consider how judges learn from prior judicial decisions. We contend that judicial decisions are subject to herding (Banerjee 1992, Bikhchandani et al. 1992) because judges hear cases in sequence and tend to announce decisions rather than the raw information they receive from litigants. We suggest that there are two ways in which judges can reduce the cost of herding. First, they can give reasons that indicate to future judges the quality of the signal they received from litigants. Second, they can used procedural rules governing justiciability and the decision not publish opinions to "hide" decisions when the quality of their signal from litigants is poor. These two techniques do not eliminate herding, but they do reduce the probability of herding on the wrong rule.
Endogenous Property Rights (Joint with: Giuseppe Dari-Mattiacci, ACLE)
Albeit the relevance of property rights is well documented, their determinants are still poorly understood. Because of transaction costs, societies solve a trade-off between private expropriation and value mis-allocation. Indeed, stronger property rights expand legal markets but shrink the consumption set of low-valuation buyers. Thus, their strength will rise with the factors limiting the consumption activities of middle-valuation buyers and fostering private expropriation by low valuation buyers-e.g., preference heterogeneity. This prediction is consistent with instrumental variables estimates based on a novel cross-country dataset on the rules regulating government takings of real property and those resolving the conflict between dispossessed original owners and innocent buyers of movable and immovable goods.
Learning and Settlement with Endogenous Sequential Litigation
This paper considers a two date settlement game between two plaintiffs and one defendant. The probability that the plaintiff prevails is correlated across the two plaintiffs, so that there is common learning from a trial between one plaintiff and the defendant. Knowing this, plaintiffs decide endogenously whether to file at date one or wait at date two. The defendant can impede learning by settling the first case. While there are a variety of equilibria depending on the magnitude of each type of plaintiff’s option value from learning, the possibility of learning with sequential litigation weakly decreases the expected number of trials in all equilibria.
Can Shareholder Litigation Discipline CEO Bonuses in the Financial Sector? The Role of Securities Class Actions (Joint with: Lucia Dalla Pellegrina, University of Milano-Bicocca)
The dynamics of executive compensation represents a critical issue, especially in the financial industry. There is evidence that even during the recent financial crisis CEOs were rewarded with disproportionate bonuses, a phenomenon that stands in vivid contrast with the wave of securities litigation that took place in that period as a consequence of managerial misbehaviour. This paper empirically investigates the relationship between securities class actions and the growth of CEO bonuses for financial intermediaries included in the S&P500 index in the period 1999-2010. We use an instrumental variable related to court behaviour in order to address problems arising from the endogenous nature of securities class actions with respect to CEO compensation. The analysis shows that the former are likely to moderate the dynamics of the latter, although the effect does not seem to persist through time.