Browsing Center for Law, Economics & Financial Institutions (LEFIC) by Title
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Abstract: Artiklen indeholder en diskussion af Værdipapirhandelslovens forbud mod insider handel. Der redegøres for tesen om effektive markeder. Med udgangspunkt i økonomisk teori redegøres for argumenter for et forbud. Der argumenteres for at, at insiderforbudets økonomiske berettigelsen med fordel kan støttes på tesen om effektive markeder. Det er i modsætning hertil blevet gjort gældende i den nyeste børsretlige teori, at den økonomiske teori om effektive markeder ikke er et adækvat grundlag for insider reglerne, og at denne teori bør erstattes af den såkaldte Lemon-teori, formuleret af Akerlof. Artiklen gør gældende, at det ikke er uden problemer at overføre Akerlof’s teori til de finansielle markeder, eftersom der ikke tages hensyn til markedets selvregulerende mekanismer, som mindsker problemet med asymmetrisk information. Artiklen afsluttes med en diskussion af de reguleringsmæssige konsekvenser som følge af valg af det økonomiske grundlag for insiderforbudet. URI: http://hdl.handle.net/10398/6793 Files in this item: 1
wplefic152003.pdf (426.7Kb) -
New Challenges and Opportunities for RegulatorsGoldberg, Lawrence G.; Sweeney, Richard J.; Wihlborg, Clas (København, 2005)[More information][Less information]
Abstract: Nordea is the first major international bank planning to operate important host country activities in branches as the Second European banking directive envisions rather than as subsidiaries. Nordea is the result of mergers of roughly equal-size universal banks in four Nordic countries with the intention to reap economies of scale and scope by providing services in an integrated organization. Nordea has so far operated under a legal structure with subsidiaries in the host countries. When the new branch organization is implemented, EU directives specify that the home country is responsible for supervision, regulation as well as deposit insurance. Supervisors in all involved countries are challenged by this prospect and they are negotiating to obtain an acceptable division of responsibilities. We argue that the Nordea case offers an opportunity to implement the EU's vision and to develop institutional foundations for substantial market discipline in banking. In particular, distress resolution and insolvency procedures for banks must be made rule based and credible for host country authorities to accept home country control. URI: http://hdl.handle.net/10398/6783 Files in this item: 1
wplefic042005.pdf (209.7Kb) -
Fosfuri, Andrea; Røende, Thomas (København, 2002)[More information][Less information]
Abstract: Abstract We analyze firms’ incentives to cluster in an industrial district to benefit from reciprocal technology spillovers. A simple model of cumulative innovation is presented where technology spillovers arise endogenously through labor mobility. It is shown that firms’ incentives to cluster are the strongest when the following three conditions are met: 1) technological progress is rapid; 2) competition in the product market is relatively soft; 3) the probability of a single firm to develop an innovation is neither very high nor very low. We show that some trade secret protection is always beneficial for firms’ profits and stimulates clustering. Excessive protection may impede technology spillovers and reduce firms’ incentives to cluster. JEL Codes: J3, K2, L1, O32, O34. Keywords: Cumulative innovation, industrial districts, intellectual property rights, technology spillovers. URI: http://hdl.handle.net/10398/6784 Files in this item: 1
wplefic132002.pdf (365.3Kb) -
validating new indicators by understanding patenting strategiesReitzig, Markus (København, 2002)[More information][Less information]
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Davis, Lee (København, 2002)[More information][Less information]
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Franke, Guenter; Peterson, Sandra; Stapleton, Richard C. (København, 2003)[More information][Less information]
Abstract: Investors choosing a portfolio strategy, in order to secure a pension at a future date for example, are faced with many uncertainties. One major uncertainty is the amount by which their pension fund will be supplemented by personal savings from a variety of sources such as life insurance contracts, bequests, or property sales. Over long periods of time these uncertainties are likely to be large and difficult to hedge, and hence may have a significant effect on the dynamic portfolio strategy. Drawing on the results of previous literature on the reaction of investors to non-unhedgeable background risk, and on the theory of stochastic dynamic programming, this article derives optimal strategies for investors maximising the expected utility of terminal wealth, where this wealth consists of the value of a pension fund plus accumulated personal savings. Numerical results, assuming that the market portfolio and the expectation of personal savings follow (possibly) correlated geometric Brownian motions, are derived to illustrate the effects of the size and uncertainty of the personal savings, as well as the effect of the resolution of the uncertainty in them over time. The computation uses a new technique for implementing the stochastic dynamic programming. This involves a binomial approximation, in two dimensions, which ensures that the computations are feasible for relatively long-term problems. URI: http://hdl.handle.net/10398/6795 Files in this item: 1
wplefic192003.pdf (540.9Kb) -
la Cour, Lisbeth; Møllgaard, Peter (København, 2002)[More information][Less information]
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Lando, Henrik (København, 2004)[More information][Less information]
Abstract: This article compares a set of often used simple contracts or mechanisms in terms of how well they allocate decision rights between two agents over time. A basic assumption is that agents incur a fixed cost each time they renegotiate. The contracts or mechanisms studied are: individual ownership and authority, the first-come first-serve rule, the alternating rule and the sign-up rule. One trade-off that arises is the following: when usage of the asset is flexible in the sense that it does not matter in which period it occurs, agents may rely on obtaining the asset through arriving first at some point, while when an agent needs to time and plan the use of the asset, he or she may wish to hold stronger rights or to use the sign-up rule as a simple form of contracting. (JEL:D10, D23, L22); Keywords: Incomplete contracts, individual ownership,first-come first-serve rule, costly renegotiation. URI: http://hdl.handle.net/10398/6815 Files in this item: 1
wplefic012004.pdf (658.9Kb) -
Lando, Henrik; Rose, Caspar (København, 2003)[More information][Less information]
Abstract: Abstract: Proponents of specific performance as a remedy for breach of contract have found support in the alleged use of the remedy in Civil Law countries. However, we provide evidence that specific performance is in fact a rare remedy in Denmark, Germany and France, and under CISG, when performance requires actions to be undertaken, and we relate this to costs of enforcement. We argue that it is administratively costly to run a system of enforcement that renders specific performance attractive to the aggrieved party, and that the Civil Law countries have (like Common Law countries) chosen not to incur these costs of enforcement. This is especially clear in the case of Denmark, where specific performance of actions has been abandoned as a legal remedy. At the normative level, we argue that enforcement costs provides an additional rationale, over and above the rationales of the theory of efficient breach, for damages and against specific performance as the general remedy. URI: http://hdl.handle.net/10398/6823 Files in this item: 1
wplefic142003new2.pdf (270.4Kb) -
Eliasson, Gunnar; Wihlborg, Clas (København, 2003)[More information][Less information]
Abstract: The New Economy is closely associated with computing & communications technology, notably the Internet. We discuss property rights to, and trade in, the difficult-to-define intangible assets increasingly dominating the New Economy, and the possibility of under-investment in these assets. For a realistic analysis we introduce a Schumpeterian market environment (the experimentally organized economy). Weak property rights prevail when the rights to access, use, and trade in intangible assets cannot be fully exercised. The trade-off between the benefits of open access on the Internet, and the incentive effects of strengthened property rights, depend both on the particular strategy a firm employs to secure property rights, and the protection offered by law. Economic property rights can be strengthened if the originator can find innovative ways to charge for the intangible assets. The extreme complexity of the New Economy and the large number of possible innovative private contract arrangements make it more important to facilitate the use and enforcement of private individualized contracts to protect intellectual property than to rely only on standard mandatory patent and copyright law. Enabling law is one proposed solution. Current patent legislation in the US has led to costly litigation processes weakening the position of small firms and individuals in patent disputes. The property rights of such firms and individuals could be strengthened with insurance or arbitration procedures. Key words: Competence bloc theory, Enabling law, Experimentally Organized Economy, New Economy, Weak property rights, Tradability, Underinvestment. URI: http://hdl.handle.net/10398/6811 Files in this item: 1
wplefic052003.pdf (378.8Kb) -
Lando, Henrik (København, 2005)[More information][Less information]
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Davis, Lee (København, 2002)[More information][Less information]
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Lando, Henrik (København, 2003)[More information][Less information]
Abstract: The standard of proof in criminal law a®ects retributive justice through the number of wrong convictions and wrong acquittals. It also a®ects the level of crime, since a higher standard of proof implies less deterrence and less incapacitation. This article derives an expression for the optimal standard from a trade-o® between these e®ects, and applies the expression to the crime of sexual violation against women. For this crime, social preferences for justice versus prevention of crime are elicited through a survey and inserted into the expression for the optimal standard. The result indicates that the concern for prevention of crime may have a signi¯cant e®ect on the optimal standard of proof. URI: http://hdl.handle.net/10398/6785 Files in this item: 1
wplefic042003.pdf (634.2Kb) -
Lando, Henrik (København, 2005)[More information][Less information]
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Lessons for the EU from United States History, 1789 - 1861Sweeney, Richard J. (København, 2003)[More information][Less information]
Abstract: If secession or expulsion ends in a "velvet divorce," as with Czechoslovakia, costs are minimal and the split is relatively unimportant. High costs arise if a federation splits into mutually hostile, comparably sized regions. Perhaps the majority of splits lead to dangerous hostility. A well-designed constitution minimizes the likelihood of hostile splits by limiting the issues that are dealt with at the federal level, by providing checks and balances, and by establishing due process under the rule of law. Preventing the conditions under which a hostile split may arise is more costeffective than trying to optimize the terms of a split or to find last-minute compromises to forestall the split. URI: http://hdl.handle.net/10398/6786 Files in this item: 1
wplefic122003.pdf (396.6Kb) -
Why Didn’t the U.S. Civil War Go On and On?Sweeney, Richard J. (København, 2003)[More information][Less information]
Abstract: The post-Civil War reconciliation between the North and the South is a very rare event in the history of civil wars. The South was thoroughly beaten. Top generals, particularly Robert E. Lee, saw further fighting as "useless effusion of blood." There was no call by top Confederate leaders for continuing the fight with the type of bushwacking that occurred in Missouri and Kansas. Reconstruction is often thought of as harsh, but compared to the standards of history Confederates were by and large treated well after the Civil War. Within a decade or so of the end of the Civil War, conservative white elites had established political, economic and social dominance in the South. They had lost their "slave property" and the "government of our own." They could never get back slavery, and a government of their own was not worth fighting for. There was little reason for the kind of persistent low-level guerilla warfare that often occurs after civil wars, or the organization of a succession of rebellions. URI: http://hdl.handle.net/10398/6810 Files in this item: 1
wplefic132003.pdf (447.2Kb) -
Lessons from the Causes of the American RevolutionSweeney, Richard J. (København, 2003)[More information][Less information]
Abstract: Because the conflicts that led to the American Revolution mainly arose from constitutional issues, the history of these conflicts offers lessons for the design of the new European Union constitution. One lesson is the importance of avoiding needless conflicts between federal and member-state governments. In particular, forcing decisions on where sovereignty lies may cause great conflict. Another lesson is that a federal system depends on good will among the federal and member-state governments, and because this good will is easily dissipated, efforts should be made to nurture it. Federal exercise of power will often alienate member states; thus, a sensible strategy is to grant the federal government only the minimal powers that a strong consensus agrees it must have, and to change these powers only by strong consensus. Removing "democratic deficits" may not be sufficient in many cases to give legitimacy to exercise of federal power; minorities may require protection by constitutional limits on federal powers. URI: http://hdl.handle.net/10398/6782 Files in this item: 1
wplefic102003.pdf (372.3Kb) -
Lando, Henrik (København, 2004)[More information][Less information]
Abstract: The paper argues that society should vary the sanction applied to a criminal defendant with the weight of the evidence against him or her. This is optimal when it is costly for society to apply sanctions, since it can yield the same degree of deterrence while requiring fewer resources to be spent on sanctioning. Furthermore, when the unfairness of convicting an innocent defendant increases with the size of the sanction, this provides a further rationale for graduating sanctions with the probability of guilt. Some objections are briefly discussed, mainly that it is inherently unfair to apply different sanctions on people, who have committed the same offense, and that the legal system will lose legitimacy if it allows sanctions to vary in the way suggested. URI: http://hdl.handle.net/10398/6820 Files in this item: 1
wplefic082004.pdf (289.7Kb) -
Wihlborg, Clas (København, 2004)[More information][Less information]
Abstract: The democratic deficit in the so-called bargaining democracy provides the motivation for constitutional efforts to limit the ability of different groups to form coalitions that are able to grant benefits to themselves through legislation that more or less directly benefit identifiable groups. A constitutional hierachy of laws that stand in conflict is proposed. In this hierarchy more "rule-oriented" legislation dominate less "rule-oriented" legislation. The main purpose of the proposal is to create a momentum of the political process towards more rule-oriented policy actions and legislation, and to inspire the policy debate to focus on principles and rules to an increasing extent. At the same time, the difficulty of defining a rule as opposed to an outcome-oriented directive is avoided by limiting the task of a constitutional court to simply rank conflicting policy actions with respect to the degree actions satisfy criteria for rules. URI: http://hdl.handle.net/10398/6791 Files in this item: 1
wplefic052004.pdf (195.8Kb) -
a matter of contractual failuresRose, Caspar (København, 2003)[More information][Less information]
Abstract: Abstract: This article analyzes the conflict of interests between shareholders and other stakeholders, including when such conflicts of interests may arise. It is argued that shareholder value cannot be justified simply by referring to any prerogative property rights of the shareholders. Instead, shareholder value coincides with the efficient hypothetical perfect contract. However, due to contractual failures in certain bargain situations, management may be unable to "internalize the firms externalities". This means that in these situations there is a tradeoff between a broad duty of loyalty for management in listed firms and other traditional remedies. The theoretical insights are applied on a case from the Danish Supreme Court (Louis Poulsen A/S) where the interests of the stakeholders were decisive. However, it is shown that the verdict may instead harm the relevant stakeholders illustrating how cautious the legal system should use a doctrine based on the "company’s interests". In addition, the notion of a firm’s social responsibility is critically evaluated together with the associated pitfalls of accepting this concept. URI: http://hdl.handle.net/10398/6796 Files in this item: 1
wplefic162003.pdf (375.9Kb)