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John Armour

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Hogan Lovells Professor of Law and Finance*

John Armour was appointed to the Hogan Lovells Professorship of Law and Finance, in association with Oriel College on 1 July 2007, having previously been a University Senior Lecturer in Law and Fellow of Trinity Hall at Cambridge University. He studied law (MA, BCL) at the University of Oxford before completing his LLM at Yale Law School and taking up his first post at the University of Nottingham. He has held visiting posts at various institutions including the University of Bologna, Columbia Law School, the University of Frankfurt, the Max Planck Institute for Comparative Private Law, Hamburg, the University of Pennsylvania Law School and the University of Western Ontario.

He has published widely in the fields of company law, corporate finance, and corporate insolvency. His main research interest lies in the integration of legal and economic analysis, with particular emphasis on the impact on the real economy of changes in the law governing company law, corporate insolvency and financial regulation. He has been involved in policy related projects commissioned by the Department of Trade and Industry, the Financial Services Authority, the Insolvency Service, and the Jersey Economic Development Department.



Publications

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Journal Articles

2012

Brian Cheffins, J Armour and Bernard Black, 'Delaware Corporate Litigation and the Fragmentation of the Plaintiffs' Bar' (2012) Columbia Business Law Review 427 [...]

Since 2000, a growing proportion of lawsuits against directors of public companies incorporated in Delaware have been filed outside Delaware. There has also been a large increase in the likelihood of litigation challenging M&A transactions involving Delaware targets, and the likelihood that suits involving the same transaction will be filed both in Delaware and elsewhere. In this Article we explore one potential cause for these trends—intensified competition between plaintiffs’ law firms. We trace the development of the plaintiffs’ bar from the 1970s to the present and identify three changes that plausibly contributed to the out-of-Delaware trend and a higher litigation rate: (1) stronger competition among plaintiffs’ lawyers specializing in securities litigation also affected the corporate law side of the plaintiffs’ bar; (2) changes in how the Delaware courts selected lead counsel encouraged non-Delaware filing by firms who were unlikely to win lead counsel status in Delaware; (3) potential obstacles associated with launching a suit in a jurisdiction other than Delaware become less of a concern to the plaintiffs’ bar. This Article draws upon data and insights developed more fully in a related policy-oriented paper: “Delaware’s Balancing Act”, 87 Indiana Law Review 1345 ( 2012), and a related empirical paper (“Is Delaware Losing its Cases”, Journal of Empirical Legal Studies (forthcoming 2012)).


ISBN: 08980721

J Armour, Bernard Black and Brian Cheffins, 'Delaware\\\'s Balancing Act' (2012) 87 Indiana Law Journal 1345 [...]

Delaware’s courts and well-developed case law are widely seen as integral elements of Delaware’s success in attracting incorporations. However, as we show using empirical evidence involving reported judicial decisions and filed cases concerning large mergers and acquisitions, leveraged buyouts, and options backdating, Delaware’s popularity as a venue for corporate litigation is under threat. Today, a majority of shareholder suits involving Delaware companies are being brought and decided elsewhere. We examine in this Article the implications of this “out-of-Delaware” trend, emphasizing a difficult balancing act that Delaware faces. If Delaware accommodates litigation too readily, companies, fearful of lawsuits, may incorporate elsewhere. But if plaintiffs’ attorneys find the Delaware courts unwelcoming, they can often file cases in other courts. Delaware could risk losing its status as the de facto national corporate law court, as well as the case flow that lets it provide the rich body of precedent that is part of Delaware’s overall corporate law “brand.” We assess how the Delaware courts and legislature, and Delaware companies, might respond to this threat to Delaware’s pre-eminence as the leading forum for corporate cases, as well as incorporations.


ISBN: 00196665

J Armour, BS Black and BR Cheffins, 'Is Delaware Losing its Cases?' (2012) 9 Journal of Empirical Legal Studies 605 [...]

Delaware’s expert courts are seen as an integral part of the state’s success in attracting incorporation by public companies. However, the benefit that Delaware companies derive from this expertise depends on whether corporate lawsuits against Delaware companies are brought before the Delaware courts. We report evidence that these suits are increasingly brought outside Delaware. We investigate changes in where suits are brought using four hand-collected data sets capturing different types of suits: class action lawsuits filed in (1) large M&A and (2) leveraged buyout transactions over 1994–2010; (3) derivative suits alleging option backdating; and (4) cases against public company directors that generate one or more publicly available opinions between 1995 and 2009. We find a secular increase in litigation rates for all companies in large M&A transactions and for Delaware companies in LBO transactions. We also see trends toward (1) suits being filed outside Delaware in both large M&A and LBO transactions and in cases generating opinions; and (2) suits being filed both in Delaware and elsewhere in large M&A transactions. Overall, Delaware courts are losing market share in lawsuits, and Delaware companies are gaining lawsuits, often filed elsewhere. We find some evidence that the timing of specific Delaware court decisions that affect plaintiffs’ firms coincides with the movement of cases out of Delaware. Our evidence suggests that serious as well as nuisance cases are leaving Delaware. The trends we report potentially present a challenge to Delaware’s competitiveness in the market for incorporations.


ISBN: 1740-1461

J Armour, Audrey Hsu and Adrian Walters, 'The Costs and Benefits of Secured Creditor Control in Bankruptcy: Evidence from the UK' (2012) 8 Review of Law and Economics 101 [...]

DOI: 10.1515/1555-5879.1507

The theoretical literature debates whether debtors should be permitted to contract with lenders over control rights in bankruptcy. Proponents point to coordination benefits from concentrating control rights; detractors point to inter-creditor agency costs. A recent reform of UK bankruptcy law provides an opportunity to test these theories. Until 2003, UK bankruptcy law permitted firms to give complete ex post control to secured creditors, through a procedure known as “receivership.” A bankruptcy reform then required firms to use a different procedure, “administration,” which confers greater control on unsecured creditors. We present empirical findings from a hand-coded sample of 340 bankruptcies from both before and after the change in the law. Whilst gross realizations have increased following the change in the law, these have tended to be eaten up by increased bankruptcy costs. We infer that dispersed and concentrated creditor governance in bankruptcy may be functionally equivalent.


ISBN: 1555-5879

J Armour and B.R. Cheffins, 'The Rise and Fal(?) of Shareholder Activism by Hedge Funds' (2012) Journal of Alternative Investments 17 [...]

Shareholder activism by hedge funds became a major corporate governance phenomenon in the United States in the 2000s. This article puts the trend into context by introducing a heuristic device referred to as “the market for corporate influence” to distinguish the ex ante-oriented “offensive” brand of activism hedge funds engage in from the ex post-oriented “defensive” activism carried out by mutual funds and pension funds. This article traces the rise of hedge fund activism and anticipates future developments, arguing in so doing that despite the blow the 2008 financial crisis dealt to hedge funds, their interventions will remain an important element of U.S. corporate governance going forward.


ISBN: 1520-3255

2011

J Armour and W.-G. Ringe, 'European Corporate Law 1999-2010: Renaissance and Crisis' (2011) 48 Common Market Law Review 125 [...]

European corporate law has enjoyed a renaissance in the past decade. Fifteen years ago, this would have seemed most implausible. In the mid–1990s, the early integration strategy of seeking to harmonize substantive company law seemed to have been stalled by the need to reconcile fundamental differences in approaches to corporate governance. Little was happening, and the grand vision of the early pioneers appeared more dream than ambition. Yet since then, a combination of adventurous decisions by the Court of Justice, innovative approaches to legislation by the Commission, and disastrous crises in capital markets has produced a headlong rush of reform activity. The volume and pace of change has been such that few have had time to digest it: not least policymakers, with the consequence that the developments have not always been well coordinated. The recent financial crisis has yet again thrown many – quite fundamental – issues into question. In this article, we offer an overview that puts the most significant developments of this decade into context, alongside each other and the changing patterns of corporate structure in European countries. Such developments cover, for instance, corporate mobility, corporate freedom of establishment, golden shares case law, as well as the Commission’s Company Law Action Plan CLAP and Financial Services Action Plan FSAP. Harmonization of Member States’ company laws on the rules governing listed companies and the facilitation of cross-border restructuring are also examined.


ISBN: 0165-0750

J Armour, J. Jacobs and C. Milhaupt, 'The Evolution of Hostile Takeover Regimes in Developed and Emerging Markets: An Analytical Framework' (2011) 52 Harvard International Law Journal 219 [...]

n each of the three largest economies with dispersed ownership of public companies—the United States, the United Kingdom, and Japan—hostile takeovers emerged under a common set of circumstances. Yet the national regulatory responses to these new market developments diverged substantially. In the United States, the Delaware judiciary became the principal source and enforcer of rules on hostile takeovers. These rules give substantial discretion to target company boards in responding to unsolicited bids. In the United Kingdom, by contrast, a private body consisting of market professionals was formed to adopt and enforce the rules on hostile bids and defenses. In contrast to those of the United States, the U.K. rules give the shareholders primary decisionmaking authority in responding to hostile takeover attempts. The hostile takeover regime in Japan, which developed recently and is still evolving, combines substantive rules with elements drawn from both the United States (Delaware) and the United Kingdom, while adding distinctive elements, including an independent enforcement role for Japan’s stock exchange. This Article provides an analytical framework for business law development to explain the diversity in hostile takeover regimes in these three countries. The framework identifies a range of supply and demand dynamics that drives the evolution of business law in response to new market developments. It emphasizes the common role of subordinate lawmakers in filling the vacuum left by legislative inaction, and it highlights the prevalence of “preemptive lawmaking” to avoid legislation that may be contrary to the interests of important corporate governance players. Extrapolating from the analysis of developed economies, the framework also illuminates the current state and plausible future trajectory of hostile takeover regulation in the important emerging markets of China, India, and Brazil. A noteworthy pattern that the analysis reveals is the ostensible adoption—and adaptation—of “best practices” for hostile takeover regulation derived from Delaware and the United Kingdom in ways that protect important interests within each emerging market’s national corporate governance system.


ISBN: 0017-8063

B.R. Cheffins and J Armour, 'The Past, Present and Future of Shareholder Activism by Hedge Funds' (2011) 37 Journal of Corporation Law 51 [...]

The forthright brand of shareholder activism hedge funds deploy emerged by the mid-2000s as a major corporate governance phenomenon. This Article explains the rise of hedge fund activism and offers predictions about future developments. The Article begins by distinguishing the “offensive” form of activism hedge funds engage in from “defensive” interventions “mainstream” institutional investors (e.g. pension funds or mutual funds) undertake. Variables influencing the prevalence of offensive shareholder activism are then identified using a heuristic device, “the market for corporate influence.” The rise of hedge funds as practitioners of offensive shareholder activism is traced by reference to the “supply” and “demand” sides of this market, with the basic chronology being that, while there were direct antecedents of hedge fund activists as far back as the 1980s, hedge funds did not move to the activism forefront until the 2000s. The Article brings matters up-to-date by discussing the impact of the recent financial crisis on hedge fund activism and draws upon the market for corporate influence heuristic to predict that activism by hedge funds is likely to remain an important element of corporate governance going forward.


ISBN: 0360-795X

2010

J Armour, S Deakin, V Mollica and M Siems, 'Law and Financial Development: What We are Learning from Time Series Evidence' (2010) Brigham Young University Law Review 1435 [...]

The legal origins hypothesis is one of the most important and influential ideas to emerge in the social sciences in the past decade. However, the empirical base of the legal origins claim has always been contestable, as it largely consists of cross-sectional datasets, which provide evidence on the state of the law only at limited points in time. There is now a growing body of data derived from techniques for coding crossnational legal variation over time. This time-series evidence is reviewed here and is shown to cast new light on some of the central claims of legal origins theory. Legal origins are shown to be of little help in explaining trends in the law relating to shareholder protection, although the classification of legal systems into English-, French-, and German origin “families” has greater explanatory force in the context of creditor rights. The widely-held view that increases in shareholder rights foster financial development is not supported by time-series analyses. More generally, the new evidence casts doubt on the suggestion that legal origins operate as an “exogenous” force, independently shaping both the content of laws and economic outcomes. It is more plausible to see legal systems as evolving in parallel with changes in economic conditions and political structures at national level.


2009

J Armour, S Deakin, P Lele and M Siems, 'How Do Legal Rules Evolve? Evidence from a Cross-Country Comparison of hareholder, Creditor and Worker Protection' (2009) 57 American Journal of Comparative Law 579 [...]

Much attention has been devoted in recent literature to the claim that a country’s ‘legal origin’ may make a difference to its pattern of financial development and more generally to its economic growth path. Proponents of this view assert that the ‘family’ within which a country’s legal system originated, be it common law, or one of the varieties of civil law, has a significant impact upon the quality of its legal protection of shareholders, which in turn impacts upon economic growth, through the channel of firms’ access to external finance. Complementary studies of creditors’ rights and labour regulation have buttressed the core claim that different legal families have different dynamic properties. Specifically, common law systems are thought to be better able to respond to the changing needs of a market economy than are civilian systems. This literature has, however, largely been based upon cross-sectional studies of the quality of corporate, insolvency and labour law at particular points in the late 1990s. In this paper, we report findings based on newly constructed indices which track legal change over time in the areas of shareholder, creditor and worker protection. The indices cover five systems for the period 1970-2005: three ‘parent’ systems, the UK, France and Germany; the world’s most developed economy, the US; and its largest democracy, India. The results cast doubt on the legal origin hypothesis in so far as they show that civil law systems have seen substantial increases in shareholder protection over the period in question. The pattern of change differs depending on the area which is being examined, with the law on creditor and worker protection demonstrating more divergence and heterogeneity than that relationg to shareholders. The results for worker protection are more consistent with the legal origin claim than in the other two cases, but this overall result conceals significant diversity within the two ‘legal families,' with different countries relying on different institutional mechanisms to regulate labour. Until the late 1980s the law of the five countries was diverging, but in the last 10-15 years there has been some convergence, particularly in relation to shareholder protection.


J Armour and P Lele, 'Law, Finance and Politics: The Case of India' (2009) 43 Law and Society Review 491 [...]

DOI: 10.1111/j.1540-5893.2009.00380.x

The process of liberalisation of India's economy since 1991 has brought with it considerable development both of its financial markets and the legal institutions which support these. An influential body of recent economic work asserts that a country's 'legal origin'-as a civilian or common law jurisdiction-plays an important part in determining the development of its investor protection regulations, and consequently its financial development. An alternative theory claims that the determinants of investor protection are political, rather than legal. We use the case of India to test these theories. We find little support for the idea that India's legal heritage as a common law country has been influential in speeding the path of regulatory reforms and financial development. There is a complementarity between (i) India's relative success in services and software, (ii) the relative strength of its financial markets for outside equity, as opposed to outside debt, and (iii) the relative success of stock market regulation, as opposed to reforms of creditor rights. We conclude that political explanations have more traction in explaining the case of India than do theories based on 'legal origins'.


ISBN: 0023-9216

J Armour, BS Black, BR Cheffins and RC Nolan, 'Private Enforcement of Corporate Law: An Empirical Comparison of the UK and US' (2009) 6 Journal of Empirical Legal Studies 701 [...]

DOI: 10.1111/j.1740-1461.2009.01157.x

It is often assumed that strong securities markets require good legal protection of minority shareholders. This implies both “good” law—principally, corporate and securities law—and enforcement, yet there has been little empirical analysis of enforcement. We study private enforcement of corporate law in two common-law jurisdictions with highly developed stock markets, the United Kingdom and the United States, examining how often directors of publicly traded companies are sued, and the nature and outcomes of those suits. We find, based a comprehensive search for filings over 2004–2006, that lawsuits against directors of public companies alleging breach of duty are nearly nonexistent in the United Kingdom. The United States is more litigious, but we still find, based on a nationwide search of court decisions between 2000–2007, that only a small percentage of public companies face a lawsuit against directors alleging a breach of duty that is sufficiently contentious to result in a reported judicial opinion, and a substantial fraction of these cases are dismissed. We examine possible substitutes in the United Kingdom for formal private enforcement of corporate law and find some evidence of substitutes, especially for takeover litigation. Nonetheless, our results suggest that formal private enforcement of corporate law is less central to strong securities markets than might be anticipated.


J Armour, S Deakin, P Sarkar, M Siems and A Singh, 'Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis' (2009) 6 Journal of Empirical Legal Studies 343 [...]

DOI: 10.1111/j.1740-1461.2009.01146.x

Using a panel data set covering a range of developed and developing countries, we show that common-law systems were more protective of shareholder interests than civil-law ones in the period 1995–2005. However, civilian systems were catching up, suggesting that legal origin was not much of an obstacle to formal convergence in shareholder protection law. We find no evidence of a positive impact of these legal changes on stock market development. Possible explanations are that laws have been overly protective of shareholders and that transplanted laws have not worked well in contexts for which they were not suited.


ISBN: 1740-1453

2008

J Armour and D.J. Cumming, 'Bankruptcy Law and Entrepreneurship' (2008) 10 American Law and Economics Review 303 [...]

DOI: 10.1093/aler/ahn008

Recent initiatives in a number of countries have sought to promote entrepreneurship through relaxing the legal consequences of personal bankruptcy. Whilst there is an intuitive link, relatively little attention has been paid to the question empirically, particularly in the international context. We investigate the relationship between bankruptcy laws and entrepreneurship using data on self-employment over 16 years (1990–2005) and fifteen countries in Europe and North America. We compile new indices reflecting how "forgiving" personal bankruptcy laws are. These measures vary over time and across the countries studied. We show that bankruptcy law has a statistically and economically significant effect on self-employment rates when controlling for GDP growth, MSCI stock returns, and a variety of other legal and economic factors.


ISBN: 1465-7252

J Armour, A. Hsu and A.J. Walters, 'Corporate Insolvency in the United Kingdom: the Impact of the Enterprise Act 2002' (2008) 5 European Company and Financial Law Review 135 [...]

With effect from September 15, 2003, the Enterprise Act made significant changes to the governance of corporate rescue procedures in the United Kingdom which involved a shift away from a "concentrated creditor" model of governance towards a "dispersed creditor" model of governance which vests greater control rights in unsecured creditors collectively. These changes were motivated by fairness and efficiency concerns, notably the concern that the UK's administrative receivership procedure was not conducive to rescue outcomes and operated to the detriment of unsecured creditors. This article discusses the Enterprise Act reforms in the context of wider theoretical debates about the desirability (or otherwise) of secured creditor control of corporate rescue procedures. It then presents in summary form the findings of an empirical study carried out by the authors that sought to evaluate the impact of the Act by comparing the gross realizations, costs and net returns to creditors in a sample of 284 corporate insolvencies commenced before and after the law changed. Whilst we find that gross realizations have increased under the streamlined administration procedure, we also find that costs have increased. These findings imply that secured creditor control of the insolvency procedure (as in receivership) may be no worse for unsecured creditors than control by dispersed unsecured creditors (as in administrations) at least as regards returns.


J Armour and B.R. Cheffins, 'The Eclipse of Private Equity' (2008) 33 Delaware Journal of Corporate Law [...]

Private equity, characterized by firms operating as privately held partnerships organizing the acquisition and "taking private" of public companies, has recently dominated the business news due to deals unprecedented in number and size. If this buyout boom continues unabated, the 1989 prediction by economist Michael Jensen of The Eclipse of the Public Corporation could be proved accurate. This article argues matters will work out much differently, with the current version of private equity being eclipsed. One possibility is that a set of market and legal conditions highly congenial to "public-to-private" transactions could be disrupted. A "credit crunch" commencing in the summer of 2007 stands out as the most immediate threat. The article draws on history to put matters into context, discussing how the spectacular rise of conglomerates in the 1960s was reversed in subsequent decades and how the 1980s buyout boom led by leveraged buyout associations - the private equity firms of the day - collapsed. If legal and market conditions remain favorable for private equity, its eclipse is likely to occur in a different way. Privacy has been a hallmark of private equity, with industry leaders operating as secretive partnerships that negotiate buyouts behind closed doors and restructure portfolio companies outside the public gaze. However, the private equity boom created momentum among market leaders to carry out public offerings and diversify their operations. If this trend proves sustainable, then even if the taking private of publicly quoted companies remains a mainstream pursuit, the exercise will be carried out in the main by broadly based financial groups under the umbrella of public markets.


J Armour, 'The Law and Economics Debate About Secured Lending: Lessons for European Lawmaking?' (2008) 5 European Company and FInancial Law Review 3 [...]

This review paper is a contribution to a symposium on the 'Future of Secured Credit in Europe'. Its theme is the way in which empirical research has shed light on earlier theoretical literature. These findings tend to suggest that the legal institution of secured credit is, on the whole, socially beneficial, and that such benefits are likely to outweigh any associated social costs. Having made this general claim, the paper then turns to consider the effects of four particular dimensions across which systems of secured credit may differ, and which may therefore be of interest to European law-makers. These are: (i) the scope of permissible collateral; (ii) the efficacy of enforcement; (iii) the priority treatment of secured creditors; and (iv) the mechanisms employed to assist third parties in discovering that security has been granted. In each case, consideration is paid first to the theoretical position, and then empirical findings. It is argued that perhaps the most difficult of these issues for European law-makers concerns the appropriate design of publicity mechanisms for third parties.


2007

J Armour and M. J. Whincop, 'The Proprietary Foundations of Corporate Law' (2007) 27 Oxford Journal of Legal Studies [...]

DOI: 10.1093/ojls/gqm009

Recent work in both the theory of the firm and of corporate law has called into question the appropriateness of analysing corporate law as ‘merely’ a set of standard form contracts. This article develops these ideas by focusing on property law's role in underpinning corporate enterprise. Rights to control assets are a significant mechanism of governance in the firm. However, their use in this way predicates some arrangement for stipulating which parties will have control under which circumstances. It is argued that ‘property rules’—a category whose scope is determined functionally—protect the entitlements of parties to such sharing arrangements against each other's opportunistic attempts to grant conflicting entitlements to third parties. At the same time, the legal system uses a range of strategies to minimize the costs such protection imposes on third parties. The choice of strategy significantly affects co-owners’ freedom to customize their control-sharing arrangements. This theory is applied to give an account of the ‘proprietary foundations’ of corporate law, which has significant implications for the way in which the subject's functions are understood and evaluated.


ISBN: 0143-6503

J Armour and D.A. Skeel, Jr., 'Who Writes the Rules for Hostile Takeovers, and Why? The Peculiar Divergence of US and UK Takeover Regulation' (2007) 95(6) Georgetown Law Journal 1727 [...]

Hostile takeovers are commonly thought to play a key role in rendering managers accountable to dispersed shareholders in the "Anglo-American” system of corporate governance. Yet surprisingly little attention has been paid to the very significant differences in takeover regulation between the two most prominent jurisdictions. In the United Kingdom, defensive tactics by target managers are prohibited, whereas Delaware law gives U.S. managers a good deal of room to maneuver. Existing accounts of this difference focus on alleged pathologies in competitive federalism in the United States. In contrast, we focus on the “supply-side” of rule production by examining the evolution of the two regimes from a public choice perspective. We suggest that the content of the rules has been crucially influenced by differences in the mode of regulation. In the United Kingdom, self-regulation of takeovers has led to a regime largely driven by the interests of institutional investors, whereas the dynamics of judicial law-making in the United States have benefited managers by making it relatively difficult for shareholders to influence the rules. Moreover, it was never possible for Wall Street to “privatize” takeovers in the same way as the City of London, because U.S. federal regulation in the 1930s both pre-empted selfregulation and restricted the ability of institutional investors to coordinate.


ISBN: 0016-8092

2006

J Armour, 'European Corporate Insolvencies: the Race goes to the Swiftest?' (2006) 65 Cambridge Law Journal 504

J Armour and A. J. Walters, 'Funding Liquidation: a Functional View' (2006) 122 Law Quaterly Review 303

J Armour, 'Legal Capital: an Outdated Concept?' (2006) 7 European Business Organization Law Review 5 [...]

DOI: 10.1017/S156675290600005X

This paper reviews the case for and against mandatory legal capital rules. It is argued that legal capital is no longer an appropriate means of safeguarding creditors' interests. This is most clearly the case as regards mandatory rules. Moreover, it is suggested that even an ‘opt in’ (or default) legal capital regime is unlikely to be a useful mechanism. However, the advent of regulatory arbitrage in European corporate law will provide a way of gathering information regarding investors' preferences in relation to such rules. Those creditor protection rules that do not further the interests of adjusting creditors will become subject to competitive pressures. Legislatures will be faced with the task of designing mandatory rules to deal with the issues raised by ‘non-adjusting’ creditors in a proportionate and effective manner, consistent with the Gebhard formula.


ISBN: 1566-7529

J Armour and D. J. Cumming, 'The Legislative Road to Silicon Valley' (2006) 58 Oxford Economic Papers 596 [...]

DOI: 10.1093/oep/gpl007

Must policymakers seeking to replicate the success of Silicon Valley's venture capital market first copy other US institutions, such as deep and liquid stock markets? Or can legislative reforms alone make a significant difference? In this paper, we compare the economic and legal determinants of venture capital investment, fundraising, and exits. We introduce a cross-sectional and time series empirical analysis across 15 countries and 14 years of data spanning an entire business cycle. We show that liberal bankruptcy laws stimulate entrepreneurial demand for venture capital; that government programmes more often hinder than help the development of private equity, and that the legal environment matters as much as the strength of stock markets. Our results imply generalizable lessons for legal reform.


ISBN: 00307653

J Armour and A.J. Walters, 'The Proceeds of Office-holder Actions under the Insolvency Act: Charged Assets or Free Estate?' (2006) Lloyds’ Maritime and Commercial Law Quarterly 27

2005

J Armour and Conaglen, M. D. J., 'Directorial Disclosure' (2005) 64 Cambridge Law Journal 48

J Armour, 'La Reforma de los Procedimientos de Recuperación de Empresas en Crisis en el Reino' (2005) 3 Revista de Derecho Concursal y Paraconcursal 403

J Armour and R.J. Mokal, 'Reforming the Governance of Corporate Rescue: The Enterprise Act 2002' (2005) Lloyds’ Maritime and Commercial Law Quarterly 28 [...]

English corporate insolvency law has been reshaped by the Enterprise Act 2002. The Act was intended to 'to facilitate company rescue and to produce better returns for creditors as a whole'. Administrative receivership, which placed control of insolvency proceedings in the hands of banks, is for most purposes being abolished. It is being replaced by a 'streamlined' administration procedure. Whilst it will still be possible for banks to control the appointment process, the administrator once in office owes duties to all creditors and must act in accordance with a statutory hierarchy of objectives. In this article, we seek to describe, and to evaluate, this new world of corporate rescue.


ISBN: 0306-2945

2004

J Armour, 'Corporate Opportunities: If in Doubt, Disclose (But How?)' (2004) Cambridge Law Journal 33

J Armour, 'Floating Charges: All Adrift?' (2004) 63 Cambridge Law Journal 560

J Armour, 'Personal Insolvency Law and the Demand for Venture Capital' (2004) 5 European Business Organization Law Review 87 [...]

DOI: 10.1017/S1566752904000874

Scholars working in the ‘law and finance’ field have investigated empirically the links between various types of law and the incidence of venture capital finance. However, no study to date has systematically investigated the relationship between insolvency law – both personal and corporate – and venture capital finance. This paper argues that a nation’s personal insolvency law may have an important impact on the demand for venture capital finance, with more severe treatment of insolvents tending to reduce demand. This hypothesis is subjected to a preliminary test by comparing data on venture capital investment activity with an index of ‘severity’ of insolvency laws, and is not falsified. This finding will be of interest to policymakers, as a number of recent national and EU initiatives have sought explicitly to encourage innovative firms and venture capital finance.


ISBN: 1566-7529

J Armour, 'The Chequered History of the Floating Charge' (2004) 13 Griffith Law Review 27

J Armour and R.J. Mokal, 'The New UK Corporate Rescue Procedure—The Administrator’s Duty to Act Rationally' (2004) International Corporate Rescue 136

2003

J Armour and N. R. Campbell, 'Demystifying Corporate Civil Liability' (2003) 62 Cambridge Law Journal 290

J Armour, 'Financial Assistance: A Restatement' (2003) 62 Cambridge Law Journal 266

J Armour and J.A. McCahery, 'Improving Corporate Law and the Modernization of Securities Regulation in Europe' (2003) 24 Journal of Corporate Law Studies 211

J Armour and S. Deakin, 'Insolvency and Employment Protection: the Mixed Effects of the Acquired Rights Directive' (2003) 22 International Review of Law & Economics 443 [...]

DOI: 10.1016/S0144-8188(02)00114-X

The statutory protection provided by European Community law to employees during transfers of undertakings and other restructurings has been criticised on the grounds that it undermines insolvency procedures and interferes with the ‘rescue’ process. We present an analysis which suggests that granting employees rights of this kind may be an efficient means of recognising their firm-specific human capital. Case-study evidence is then presented to show that while in some situations employment rights may obstruct reorganisations, in others they allow employee interests to be factored into the bargaining process in such a way as to enhance the survival chances of enterprises undergoing restructuring. The law functions best when effective mechanisms of employee representation are in place and when the conditions under which employees’ acquired rights can be waived in the interests of preserving employment are clearly specified.


ISBN: 0144-8188

J Armour, S. Deakin and S. Konzelmann, 'Shareholder Primacy and the Trajectory of UK Corporate Governance' (2003) 41 British Journal of Industrial Relations 531 [...]

DOI: 10.1111/1467-8543.00286

Core institutions of UK corporate governance, in particular those relating to takeovers, board structure and directors' duties, are strongly orientated towards a norm of shareholder primacy. Beyond the core, in particular at the inter-section of insolvency and employment law, stakeholder interests are better represented, thanks largely to European Community influence. Moreover, institutional shareholders are redirecting their investment strategies away from a focus on short-term returns, in such a way as to favour stakeholder-inclusive practices. We therefore suggest that the UK system is currently in a state of flux and that the debate over shareholder primacy has not been concluded.


ISBN: 0 19 928703 1

J Armour, 'The Uncertain Flight of British Eagle' (2003) 62 Cambridge Law Journal 39

2002

J Armour, B.R. Cheffins and D.A. Skeel, 'Corporate ownership structure and the evolution of bankruptcy Law: Lessons from the UK' (2002) 55 Vanderbilt Law Review 1699

2001

J Armour and M. J. Whincop, 'An Economic Analysis of Shared Property in Partnership and Close Corporations Law' (2001) 26 Journal of Corporation Law 101

J Armour and S. Deakin, 'Norms in Private Insolvency: The London Approach to the Resolution of Financial Distress' (2001) 1 Journal Corporate Law Studies 21 [...]

In recent years law and economics scholarship has expanded its frame of reference to incorporate the role of social norms in shaping the incentives of actors. This shift in perspective has yet to filter through to the literature on bankruptcy, which has to date concentrated on the role of legal rules in resolving financial distress. This paper presents qualitative findings on how financial distress is resolved amongst creditors of large UK firms. Such restructurings proceed according to an informal set of market norms known collectively as the "London Approach." The paper suggests that regulatory pressure applied by the Bank of England may have been critical in "seeding" the market norms. It also examines the prospects for the London Approach's future in light of changes in the financial environment brought about by globalisation. The paper points the way towards an incorporation into bankruptcy scholarship of the role played by social norms.


ISBN: 1473-5970

J Armour and S. Frisby, 'Rethinking Receivership' (2001) 21 Oxford Journal of Legal Studies 73 [...]

DOI: 10.1093/ojls/21.1.73

It is a popular perception that administrative receivers and their appointors hold «too much» power in relation to troubled companies. Many who hold this view have called for the reform of insolvency law in order to redress the balance of power. This issue is timely, because insolvency law is currently under review. This article argues that although the law's formal structure is imbalanced, it can nevertheless generate savings for parties, by allowing a concentrated creditor who has invested in information-gathering about the debtor to conduct a private insolvency procedure. It is suggested that this procedure is likely to be more efficient than one conducted by a state official, and that it is likely to reduce the costs of debt finance, a matter of particular importance for small and medium-sized businesses. Empirical data are presented from 26 interviews with practitioners, which shed further light on the operation of receivership. Finally, the current law is compared with possible alternatives. It is argued that the case for wide-ranging reform is not made out.


ISBN: 1464-3820/0143-6503

2000

J Armour, 'Share Capital and Creditor Protection: Efficient Rules for a Modern Company Law?' (2000) 63 Modern Law Review 355 [...]

DOI: 10.1111/1468-2230.00268

This article examines the case for rules of company law which regulate the raising and maintenance of share capital by companies. The enquiry has practical relevance because the content of company law is currently under review, and the rules relating to share capital have been singled out for particular attention. The existing rules, which apply generally, are commonly rationalised as a means of protecting corporate creditors. The analysis considers whether such rules can be understood as responses to failures in the markets for corporate credit. It suggests that whilst the current rules are unlikely, on the whole, to be justified in terms of efficiency, a case may be made for a framework within which companies may 'opt in' to customised restrictions on dealings in their share capital.


ISBN: 1468-2230/0026-7961

J Armour and S. Deakin, 'The Rover Case (2): Bargaining in the Shadow of TUPE' (2000) 29 Industrial Law Journal 395

J Armour, 'Who Pays When Polluters Go Bust?' (2000) 116 Law Quarterly Review 200

1999

J Armour, 'Corporate Personality and Assumption of Responsibility' (1999) Lloyds’ Maritime & Commercial Law Quarterly 246

1997

J Armour, 'Directors' Self-Dealing: The Plot Thickens' (1997) 113 Law Quarterly Review 540

Books

2009

J Armour, R Kraakman, P Davies, L Enriques, H Hansmann, G Hertig and K Hopt, H Kanda, E Rock, The Anatomy of Corporate Law (Oxford University Press 2009)

Chapters

2012

J Armour, 'The Rise of the Pre-Pack: Corporate Restructuring in the UK and Proposals for Reform' in R.P. Austin and Fady J.G. Aoun (eds), Restructuring Companies in Troubled Times: Director and Creditor Perspectives (Ross Parsons Centre Sydney Law School 2012)

2011

J Armour, 'Abuse of European Insolvency Law? A Discussion' in R. De La Feira and S. Vogenauer (eds), Prohibition of Abuse of Law: A New General Principle of EU Law? (Hart Publishing 2011)

J Armour and B.R. Cheffins, 'Origins of Offensive Shareholder Activism in the United States' in J.G.S. Koppell (ed), Origins of Shareholder Advocacy (Palgrave Macmillan 2011) [...]

“Offensive shareholder activism” involves buying up sizeable stakes in underperforming companies and agitating for changes predicted to increase shareholder returns. Though hedge funds are currently highly publicized practitioners of this corporate governance tactic, there has been no analysis of the extent to which managers of U.S. public companies were faced with challenges of this nature during the first half of the 20th century. This paper correspondingly examines instances during this period where investors engaged in offensive shareholder activism, based on a hand collected dataset of proxy contests occurring between 1900 and 1949. Our findings indicate that offensive shareholder activism, while not commonplace, did occur and was considerably more prevalent in the 1930s and 1940s than in earlier decades. We explain our results by reference to a simple model of offensive shareholder activism and argue that the ebb and flow of takeover activity may have been the primary determinant of the trends we observe.


ISBN: 978-0230107328

2009

J Armour, 'Enforcement Strategies in UK Corporate Governance: A Roadmap and Empirical Assessment' in John Armour and Jennifer Payne (eds), Rationality in Company Law (Hart Publishing 2009) [...]

Shares in publicly-quoted UK companies are, similarly to those in their US counterparts, dispersed amongst many holders. The central problem of corporate governance for UK listed firms is therefore rendering managers accountable to shareholders. This paper investigates the way in which the mechanisms used to control these managerial agency problems are enforced. It provides a roadmap of the enforcement strategies employed, and a first approximation of their empirical significance. The results suggest three stylised facts about the UK corporate governance system. First, shareholder lawsuits are conspicuous by their absence. Formal private enforcement plays little or no role in controlling managers. Secondly, and contrary to leading accounts in the economic literature, it is public, rather than private, enforcement which dominates in relation to listed companies. However, the lion's share of the interventions by the relevant agencies - the Takeover Panel, the Financial Reporting Review Panel, and the Financial Services Authority - is of an informal character, not resulting in any legal action. Suasion, rather than sanction, is the order of the day. Thirdly, a simple divide between public and private enforcement fails fully to take account of the role played by institutional investors in the UK, who have engaged systematically in informal private enforcement activity. Strong informal private enforcement has historically therefore been the flipside, in the UK, of weak formal private enforcement.


ISBN: 9781841138060

J Armour, 'European Insolvency Proceedings and Party Choice: Comment' in L Gullifer, W-G Ringe and P Thery (eds), Current Issues in European Financial and InsolvencY Law (Hart Publishing 2009)

J Armour, 'What Has the Financial Crisis Taught Us About Insolvency Law?' in P Essers, G Raaijmakers, G van der Sangen, A Verdam and E Vermeulen (eds), Met Recht: Liber Amicorum for Theo Raaijmakers ( 2009)

2008

J Armour, 'Codification and UK Company Law' in Association du Bicentenaire du Code du Commerce (ed), Bicentenaire du Code de Commerce 1807-2007: Les Actes des Colloques (Dalloz 2008)

2007

J Armour, 'Companies and Other Associations' in Andrew Burrows (ed), English Private Law ( 2007)

2006

J Armour and J. A. McCahery, 'Introduction' in J. Armour and J. A. McCahery (eds), After Enron: Reforming Corporate Law and Modernising Securities Regulation in Europe and the US (Hart Publishing, Oxford 2006)

J Armour, 'Overview of the Treatment of Stakeholders in UK Corporate Insolvency Law' in H. Peter, N. Jeandin and J. Kilborn (eds), The Challenges of Insolvency Law in the 21st Century (Schulthess, Zurich 2006)

J Armour, 'Should We Redistribute in Insolvency?' in Joshua Getzler and Jennifer Payne (eds), Company Charges: Spectrum and Beyond (OUP 2006)

J Armour, 'The Governace of Corporate Rescue in the UK' in H. Peter, N. Jeandin and J. Kilborn (eds), The Challenges of Insolvency Law in the 21st Century (Schulthess, Zurich 2006)

J Armour, 'Who Should Make Corporate Law? EU Legislation versus Regulatory Competition' in Jane Holder and Colm O'Cinneide (eds), Current Legal Problems 2005 (Volume 58) (OUP 2006) [...]

This paper makes a case for the future development of European corporate law through regulatory competition rather than EC legislation. It is for the first time becoming legally possible for firms within the EU to select the national company law that they wish to govern their activities. A significant number of firms can be expected to exercise this freedom, and national legislatures can be expected to respond by seeking to make their company laws more attractive to firms. Whilst the UK is likely to be the single most successful jurisdiction in attracting firms, the presence of different models of corporate governance within Europe make it quite possible that competition will result in specialisation rather than convergence, and that no Member State will come to dominate as Delaware has done in the US. Procedural safeguards in the legal framework will direct the selection of laws which increase social welfare, as opposed simply to the welfare of those making the choice. Given that European legislators cannot be sure of the 'optimal' model for company law, the future of European company law-making would better be left with Member States than take the form of harmonized legislation.


ISBN: 9780199285396

2005

J Armour and Skeel, D. A., 'An Ocean of Difference on Takeover Regulation' in Grant, J. (eds), European Takeovers: The Art of Acquisition (London: Euromoney Books 2005)

J Armour, 'Responsabilità delle Banche nel Regno Unito nell Situazioni di Salvataggio' in Bonfatti, S. and Falcone, G. (eds), Le Responsabilità della Banca e dell’Impresa nella Gestione delle Situazioni di Crisi (Milan: Giuffre 2005)

2003

J Armour, 'Avoidance of Transactions as a ‘Fraud on Creditors’ at Common Law' in Armour, J. & Bennett, H. N. (eds), Vulnerable Transactions in Corporate Insolvency (Oxford:Hart Publishing 2003)

J Armour, 'Law, Finance and Innovation' in McCahery, J.A. & Renneboog, L. (eds), Venture Capital Contracting and the Valuation of Hi-Tech Firms (Oxford: OUP 2003) [...]

This chapter reviews evidence about the extent to which law and lawyers ‘matter’ for venture capital investment. As such, it relates both to the policy debate about financing innovative firms and more generally to the comparative finance literature that has investigated the extent to which law may be one of the determinants of differing patterns of corporate finance across various countries. The review is organised around the idea that law may ‘matter’ in a variety of ways for corporate finance. The starting point is a model of what venture capital investment involves, derived from empirical studies in the US. The venture capitalist is a financial intermediary, who raises funds from end-investors which are then used to finance small entrepreneurial firms. The contracts between the venture capitalist and the investee firms have complex terms which can be understood as responses to agency problems inherent in the financing relationship. The first way in which laws may ‘matter’ is by affecting the way in which the practice of venture capital investment is structured—most obviously, in the terms of the contracts used. Empirical studies of the contracting practices of venture capitalists show clear differences between national practices, and it is plausible that some at least of these may be driven by differences in the legal regimes. Most obviously, these might arise due to mandatory legal rules—for example, local tax laws—which distort choices of inframarginal investors in favour of a particular type of financial contract.


J Armour, 'Transactions at an Undervalue' in Armour, J. & Bennett, H.N. (eds), Vulnerable Transactions in Corporate Insolvency (Oxford: Hart Publishing 2003)

J Armour, 'Transactions Defrauding Creditors' in Armour, J. Bennett, H. N. (eds), Vulnerable Transactions in Corporate Insolvency (Oxford: Hart Publishing 2003)

2001

J Armour, 'The Law and Economics of Corporate Insolvency: A Review' in R.D. Vriesendorp, J.A. McCahery and F.M.J. Verstijlen (eds), Comparative and International Perspectives on Bankruptcy Law Reform in the Netherlands (Boom Juridische uitgevers 2001)

Edited books

2009

J Armour and J. Payne (eds), Rationality in Company Law (Hart Publishing 2009) [...]

This collection of essays is a festschrift to honour Professor Dan Prentice who retired in 2008 from the Allen & Overy Professorship of Company Law in the University of Oxford. Dan Prentice has been deeply involved in corporate law from all perspectives: as a scholar, teacher, law reformer and practising member of Erskine Chambers. His interests have covered the full range of corporate law, finance and insolvency. The occasion of his retirement from his Professorship has afforded a number of leading corporate law experts from around the world, many of whom are his former students and colleagues, an opportunity to address some of the most important issues in corporate law today, in his honour. Corporate law has always been a fast-moving area, but the present pace of change seems quicker than ever. The Companies Act 2006, by some way the longest piece of legislation ever passed by the UK Parliament, is reshaping the landscape of domestic company law. At the same time, legislative and judicial developments at the European level in corporate and securities law are of unprecedented importance for corporate lawyers based in the UK. This outstanding series of papers addresses a number of the most important issues currently facing the subject, including the impact of the new Companies Act on directors' duties, shareholder litigation and capital maintenance; aspects of insolvency and banking regulation, the Capital Requirements Directive, and a new Convention on Intermediated securities. It will be essential reading for all those interested in the field.


2006

J Armour and J.A. McCahery (eds), After Enron: Reforming Corporate Governance and Capital Markets in Europe and the US (Hart Publishing 2006) [...]

At the end of the twentieth century, it was thought by many that the Anglo-American system of corporate governance was performing effectively. Some observers claimed to see an international trend towards convergence around this model, in which firms raise finance on capital markets from dispersed investors, and corporate governance seeks to keep managers accountable to shareholders. There can be no denying that the recent corporate governance crisis in the US - Enron and related scandals - has caused many to question their faith in this view. This collection of essays provide a comprehensive attempt to answer the following questions: firstly, what went wrong - when and why do markets misprice the value of firms, and what was wrong with the incentives set by Enron? Secondly, what has been done in response, and how well will it work - including essays on the Sarbanes-Oxley Act in the US, UK company law reform and European company law and auditor liability reform, along with a consideration of corporate governance reforms in historical perspective. Three approaches emerge. The first two share the premise that the system is fundamentally sound, but part ways over whether a regulatory response is required. The first view argues that the events of the 'fall' have indicated a need for greater regulation to curb the excesses of the market. The second view suggests that Enron was merely an aberration, which 'self-corrected' anyway, and consequently the regulatory response has been unnecessarily restrictive. The third view, in contrast, argues that the various scandals demonstrate fundamental weaknesses in the Anglo-American system itself, which cannot hope to be repaired by the sort of reforms that have taken place. It is for the reader, and ultimately history, to decide which view is correct.


ISBN: 978-1-84113-531-1

Others

2000

J Armour, 'Capital Maintenance’, in ESRC Centre for Business Research' (2000) Literature Survey on Factual, Empirical and Legal Issues 166

Reports

2003

J Armour, J. Bates, S. Deakin and M. Whincop, 'Corporate Governance via the Listing Rules' (UK Listing Authority 2003)



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