Corporate Law

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Volume 93.4
How Deals Die
Da Lin
Senior Lecturer, Victoria University of Wellington; Affiliated Scholar, University of Richmond School of Law.

We are grateful to Adam Badawi, Albert Choi, Elisabeth de Fontenay, Jeff Gordon, Steven Haas, Lawrence Hamermesh, Scott Hirst, David Katz, Ronald Masulis, Holger Spamann, and Randall Thomas for generous conversations and valuable feedback, and to workshop participants at the Conference on Empirical Legal Studies, Junior Faculty Forum, NYU/Penn Conference on Law & Finance, Tulane Corporate Law Roundtable, Winter Deals Conference, the University of Richmond School of Law, Temple University Beasley School of Law, Vanderbilt Law School, and the New Zealand Takeovers Panel. The production of this Article involved a team of exceptional research assistants too large to mention here, to whom we are immensely grateful and whose names we list in Appendix A.

Morgan Ricks
Herman O. Loewenstein Chair in Law, Vanderbilt Law School.

We are grateful to Adam Badawi, Albert Choi, Elisabeth de Fontenay, Jeff Gordon, Steven Haas, Lawrence Hamermesh, Scott Hirst, David Katz, Ronald Masulis, Holger Spamann, and Randall Thomas for generous conversations and valuable feedback, and to workshop participants at the Conference on Empirical Legal Studies, Junior Faculty Forum, NYU/Penn Conference on Law & Finance, Tulane Corporate Law Roundtable, Winter Deals Conference, the University of Richmond School of Law, Temple University Beasley School of Law, Vanderbilt Law School, and the New Zealand Takeovers Panel. The production of this Article involved a team of exceptional research assistants too large to mention here, to whom we are immensely grateful and whose names we list in Appendix A.

The risk of deal breakage is central to merger and acquisition (M&A) dealmaking. Yet neither the finance nor corporate law literatures have systematically explored how and why deals fall apart. This Article rectifies this deficiency, making three principal contributions. First, it develops a comprehensive typology of eight M&A outcomes: completed-as-announced deals and seven types of deal breakage. Second, it unveils a novel dataset of 5,058 mergers and acquisitions involving U.S. public company targets signed between 1996 and 2020. Finally, it demonstrates how the Article's typology and data yield important implications for M&A practice and doctrine by casting new light on key debates over deal protection devices, the power of controlling shareholders, and “merger arbitrage” investors.

Online
Essay
Capital Markets and Oracles
Saul Levmore
William B. Graham Distinguished Service Professor, The University of Chicago Law School.

Recently, the idea of self-negating prophecies has gained traction as a public choice problem. It might now be situated in behavioral economics as much as in sociology and psychology. In capital markets, small investors might be dissuaded from taking optimal precautions simply because it is difficult to evaluate risks. An investment manager is nonetheless rewarded for producing high rates of return and is often abandoned when underperforming other professional investors. Things are different for a recognized oracle with significant influence on the market. This Essay explores the phenomenon of self-negating prophecies in the business world and evaluates the likelihood that predictions by this oracle can be self-negating rather than self-fulfilling.

Public Choice
Online
Essay
The (Guilty) Brain of the Firm: Applying Management Cybernetics to Corporate Criminal Liability
Connor Elliott
Connor Elliott is a J.D. Candidate at The University of Chicago Law School, Class of 2027. He thanks Dan Davies and the staff of The University of Chicago Law Review for their support and feedback throughout the writing process.

Because, unlike natural persons, a corporation does not have a single, unitary mind, the question of how to ascertain mens rea in a prosecution of a corporate entity presents an epistemological conundrum. The recent revival of the field of management cybernetics presents a new lens through which to examine those questions. This Essay draws on several of the central insights of management cybernetics to argue that a collective knowledge instruction is appropriate in cases where certain regulatory systems within the corporation have been attenuated to the point where they cannot operate with the complexity required by law.

Corporations Criminal Law
Online
Essay
Constitutional Limits to Regulations on Foreign-Influenced Corporate Contributions
John Cooper
John Cooper is a J.D. candidate at the University of Chicago Law School, Class of 2026.

He thanks Professor Genevieve Lakier, Elizabeth Walsh, and the entire UCLR Online team for their suggestions.

This Case Note starts by summarizing current federal law and existing litigation surrounding state legislation in the context of foreign campaign contributions. It then turns to the parallels between state and federal proposals and concludes with the potential avenues policymakers may use to avoid future constitutional challenges.

Corporations Election Law Elections
Online
Essay
Venue Transfers of Administrative Litigation and the Neglected Percolation Argument
Andrew Meyer
Andrew Meyer is a J.D. Candidate at The University of Chicago Law School, Class of 2026.

He thanks Russ Ryan, Will Horvath, and the University of Chicago Law Review Online team.

District courts should consider the value of percolation in a given case as part of their analysis in deciding whether to grant a § 1404(a) motion. The value of doing so is even more pronounced in cases with a clear pattern of repeat-player defendants moving for transfer for no apparent reason other than convenience—and perhaps a more amenable court. In such cases, district courts should directly weigh the benefits of percolation against those of judicial economy.

Administrative Law Corporate Governance Corporations
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Article
Volume 92.3
Noisy Factors in Law
Adriana Z. Robertson
Donald N. Pritzker Professor of Business Law, The University of Chicago Law School.

We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.

Pat Akey
Associate Professor of Finance, University of Toronto; Visiting Professor, INSEAD.

We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.

Mikhail Simutin
Professor of Finance, University of Toronto.

We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.

For years, academic experts have championed the widespread adoption of the “Fama-French” factors in legal settings. Factor models are commonly used to perform valuations, performance evaluation and event studies across a wide variety of contexts, many of which rely on data provided by Professor Kenneth French. Yet these data are beset by a problem that the experts themselves did not understand: In a companion article, we document widespread retroactive changes to French’s factor data. These changes are the result of discretionary changes to the construction of the factors and materially affect a broad range of estimates. In this Article, we show how these retroactive changes can have enormous impacts in precisely the settings in which experts have pressed for their use. We provide examples of valuations, performance analysis, and event studies in which the retroactive changes have a large—and even dispositive—effect on an expert’s conclusions.

Bankruptcy Corporations Law and Economics Securities Law
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Essay
Volume 92.2
Public Investment as Constitutional Power and Accountability Challenge
Saule T. Omarova
Earle Hepburn Professor of Law at the University of Pennsylvania.

We thank Aziz Huq, Adriana Robertson, and all participants in conferences and workshops at the University of Chicago and Cornell Law Schools.

Brian M. Richardson
Associate Professor of Law at Cornell University.

We thank Aziz Huq, Adriana Robertson, and all participants in conferences and workshops at the University of Chicago and Cornell Law Schools.

We offer a way of thinking about public-investment institutions as creatures of both public law and private markets. Placing public investment—a distinct public function—in the context of constitutional debates on the legitimate reach of the administrative state, we focus the search for legitimate institutional structure on the interaction between the entity’s efficacy as a market actor and the concept of public accountability. This tension, as well as synergy, is where the fundamental hybridity of public-investment institutions is most visible. We argue that only by considering the unique objectives and tools of public investment as a legitimate sovereign activity can we design workable mechanisms of democratic accountability for public-investment institutions. We hope that our observations shed light on the broader debate about the optimal implementation mechanisms for the nation’s reemerging industrial policy.

Online
Essay
AI & the Business Judgment Rule: Heightened Information Duty
Geneviève Helleringer
Professor Geneviève Helleringer, ESSEC Business School-Paris & Oxford University, and research member of ECGI. She is Visiting Professor of Law at Columbia Law School and Paris-Panthéon-Assas University. Her research focuses on comparative Commercial and Corporate Law.

We would like to thank the participants of the How AI Will Change the Law Symposium, cohosted by the Coase-Sandor Institute, the University of Chicago Law Review Online, and Oxford Business Law Blog, for their helpful comments.

Florian Möslein
Florian Möslein is the Director of the Institute for Law and Regulation of Digitalisation and Professor of Law at the Philipps-University Marburg, where he teaches Contract Law, Corporate Law and Securities Regulation.

We would like to thank the participants of the How AI Will Change the Law Symposium, cohosted by the Coase-Sandor Institute, the University of Chicago Law Review Online, and Oxford Business Law Blog, for their helpful comments.

Artificial intelligence (AI) has the potential to alter the interpretation of the duties of care, skill, and diligence. As these duties form the foundation for the BJR and equivalent provisions, the development of AI is also expected to impact the BJR. There is a broadening importance, in an increasingly data-driven business environment, of the requirement to gather sufficient information before making a decision and to use information in a valid manner. Changes are both quantitative (how much information to collect) and qualitative (which types of information to collect). The changes also relate to the methods of decision-making, including the role of measures and statistics over intuition.

Business Organizations Corporate Governance Corporations
Online
Essay
A Story of Two Holy Grails: How Artificial Intelligence Will Change the Design and Use of Corporate Insolvency Law
Felix Steffek
Felix Steffek is Professor of Law at the University of Cambridge. He serves as Director of the Centre for Corporate and Commercial Law (3CL) and holds a JM Keynes Fellowship in Financial Economics. He is Global Distinguished Professor of Law at the University of Notre Dame, SGRI Visiting Professor at Singapore Management University, and Senior Member of Newnham College.

The author is grateful for the very helpful comments received at the conference on ‘How AI Will Change the Law’ organized by the University of Chicago Coase-Sandor Institute for Law and Economics, the University of Chicago Law Review, and the Oxford Business Law Blog, in particular from Tony Casey who contributed a formal comment.

This Essay explores the two holy grails of AI and the law: predicting court decisions and predicting contracts. While there is some overlap between the two, because in order to draft contracts one needs to know the law, both issues can be functionally distinguished. These two areas, and their importance in the context of increasing AI development, are explored more deeply within the context of corporate insolvency law.

Contracts Corporations
Online
Essay
Game Over: Facing the AI Negotiator
Horst Eidenmüller
Statutory Professor for Commercial Law at the University of Oxford and Professorial Fellow of St. Hugh’s College, Oxford.

This Essay is based on my contribution to the University of Chicago Law School symposium on “How AI Will Change the Law” (April 12–13, 2024). I should like to thank the conference participants for their feedback. I am particularly grateful to Omri Ben-Shahar, Genevieve Helleringer, and Klaus Schmidt for detailed comments and suggestions.

AI applications will put an end to negotiation processes as we know them. The typical back-and-forth communication and haggling in a state of information insecurity could soon be a thing of the past. AI applications will increase the information level of the parties and drastically reduce transaction costs. A quick and predictable agreement in the middle of a visible bargaining range could become the new normal. But, sophisticated negotiators will shift this bargaining range to their advantage. They will automate negotiation moves and execute value-claiming strategies with precision, exploiting remaining information asymmetries to their advantage. Negotiations will no longer be open-ended communication processes. They will become machine-driven chess endgames. Large businesses will have the upper hand in these endgames.

Arbitration Corporations Machine Learning

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