Thursday 1 November 2007 at 12:45
Law and Finance Senior Practitioner Lectures
Enforcement of Corporate and Securities Law: An Empirical Comparison of the US and UK
Speaker: Professor John Armour, University of Oxford, Faculty of Law
Venue: Oxford Law Faculty SCR
It is often assumed that strong securities markets require good protection of minority shareholders. This implies not just “good” law, but “good” enforcement as well. Yet there has been little empirical analysis of enforcement. We study private enforcement of shareholder rights under corporate and securities law in two common law jurisdictions with strong securities markets, the US and the UK. For both countries, we examine the extent to which inside and outside directors of public companies are targeted by shareholder or creditor lawsuits, and the outcomes of those suits. Private enforcement is common in the U.S., while in the U.K., it scarcely occurs at all. However, even in the U.S., only a small number of corporate lawsuits generate a judicial decision, let alone a trial; meanwhile, in securities suits, damages are paid principally by the company and D&O insurers, and directors’ risk of personal payment is small. Our findings suggest that neither a significant risk of personal liability for wrongdoing nor frequent private enforcement is a necessary precondition for strong securities markets. They invite a search for substitutes, which may need to exist where litigation is rare.
Part of the Law and Finance Senior Practitioner Lectures
