e-journal

SYSTEMIC HARMS AND SHAREHOLDER VALUE

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ABSTRACT
The financial crisis has demonstrated serious flaws in the corporate governance of systemically
important financial firms. In particular, the norm that managers should seek to
maximize shareholder value, as measured by the stock price, proves to be a faulty guide
for managerial action in systemically important firms. This is not only because the failure
of such firms will have spillovers that defy the cost-internalization of the tort system, but
also because these spillovers will harm theirownmajoritarian shareholders. The interests
of diversified shareholders fundamentally diverge from the interests of managers and
other controllers because the failure of a systemically important financial firm will produce
losses throughout a diversified portfolio, not just own-firm losses. Among the
consequences: the business judgment rule protection that makes sense for officers
and directors of a non-financial firm leads to excessive risk-taking in a systemically important
financial firm. To encourage appropriate modification of incentives, we propose
officer and director liability rules as a complement to (and substitute for) the prescriptive
rules that have emerged from the financial crisis.

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Informasi Detail

Judul Seri

Journal of Legal Analysis

No. Panggil

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Penerbit

Oxford : Oxford University Press on behalf of The John M. Olin Center for Law., 2014

Deskripsi Fisik

Spring 2014: Volume 6, Number 1 ~ Journal of Legal Analysis

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

HUKUM

Info Detail Spesifik

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Pernyataan Tanggungjawab

agus

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