Research Interests: Corporations and Society, Law and Finance, Corporate Governance, Private law, Remedies , Political Economy, Experimental Law.
My research focuses on how to better align the interests of business and society. I analyze this in two broad ways. First, I explore the ways in which legal regimes can be used to better align the interests of business and society. Second, I study the effectiveness of extra-legal mechanisms in those cases where legal regimes are absent or ineffective.
Across these projects, I work at the intersection of law, business, and economics. The fundamental questions in each project are drawn from real-world legal and business issues. In seeking to answer these questions, I leverage theoretical, empirical, and experimental tools from finance and economics. While I strive to ensure that my work has firm analytical underpinnings, I also strive to ensure that each paper is accessible by a generalist legal audience so that my research insights can be shared with colleagues, students, and policy makers.
Large asset managers manage trillions of dollars of assets on behalf of tens of millions of clients. In this article, I take a close look at the underlying interests of those clients. Because asset managers’ clients are affected by corporate actions as customers, employees, creditors, taxpayers, and the general public, they are interested in more than the financial performance of the corporations in their portfolios. Instead of maximizing the profits of individual firms, an asset manager acting in their clients’ best interests should instead focus on improving the alignment between corporations and society more broadly. I show that asset managers can induce significant changes at portfolio companies. I then put forward a set of actions that asset managers could implement that would significantly increase clients’ collective welfare. Finally, I show that there is little legal risk from a reorientation towards client welfare by asset managers.
Despite the vast sums transferred through the legal system, the foundations of the procedures used to compensate plaintiffs for unobservable losses remain unclear. Standard remedies can compensate plaintiffs for unknown harms, but it is expensive to do so. Damage awards will generally undercompensate or overcompensate a plaintiff whose true harm is unknown, while equitable remedies that provide more tailored compensation are generally wasteful. In this paper I develop a novel remedy that compensates plaintiffs for unobservable private values at the lowest possible cost to the defendant. This remedy consists of offering the plaintiff the choice between intermediate damages and an inalienable injunction that restores the underlying harm at the conclusion of the trial. I show that this remedy is robust to errors by the court and potential post judgment renegotiation. Furthermore, I demonstrate that this remedy reduces litigants’ incentives to lie during trial. Finally, I consider ex ante deterrence and show conditions under which the remedy improves social welfare relative to optimal damages.
Corporate Liability and Capital Structure
Liability is imposed on corporations to deter bad behavior and to compensate victims. Yet the imposition of liability may lead to negative consequences including missed debt payments, job losses, and insolvency. In this article I show that how a corporation pays liability has important implications for deterrence, compensation, and collateral consequences. With debt in place, shareholders are biased towards paying liability through issuing debt or selling assets rather than through issuing equity, shifting some of the incidence of the liability onto creditors and imposing collateral consequences on workers. I show that shareholders can benefit from social-welfare decreasing corporate malfeasance even when detection is certain and the liability is equal to the harm caused. Furthermore, the presence of standard restrictive debt covenants does not solve the problem. I propose that officials mandate that firms issue equity to pay liability, and show that this eliminates the trade-off between the benefits and costs of liability and better aligns the interests of corporations and society.