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During 2005-2007, the SEC conducted a randomized trial in which it removed short-sale restrictions from one-third of the Russell 3000 firms. Early studies found modest microstructure-related effects of removing the restrictions but no effect on short interest or share prices. More recently, however, many studies have attributed a wide range of substantive indirect outcomes to this experiment. We revisit the principal findings in four recent studies in major journals, using a sample that closely matches the actual experiment and a pre-specified research design, and find no support for any of the reported results. If we instead match their specifications as best we can based on the published descriptions, we still obtain quite different results; only two of 13 outcomes are statistically significant, barely so, and even those results are tenuous. For two papers, we have the authors’ original data and code. We can technically replicate two (different) results, but those results are highly sensitive to specification. Our findings have implications for the robustness of other studies finding indirect effects of the short-sale experiment. More broadly, they have implications for the credibility of “causal” research designs which rely on randomization or on natural experiments. Researchers retain extensive discretion over both the sample and model specification, even for a true randomized experiment. The choices in these studies produced significant results, when other reasonable choices would not. The Online Appendix is available at https://ssrn.com/abstract=3657200. Our pre-specified analysis plan is available at https://ssrn.com/abstract=3415529.

This Online Appendix contains additional results and discussion for Black, Desai, Litvak, Yoo, and Yu, Specification Search in Randomized and Natural Experiments: Lessons from the Regulation SHO Experiment (2020). In particular, it contains further analysis of the various specifications and datasets publicly posted by FHK in response to an earlier draft of the paper, details on sample and other differences between our specification and the best-match specification, and step-by-step results from moving from our specification to the best-match specification for each paper. The underling paper is available at https://ssrn.com/abstract=3657196. Our pre-specified analysis plan is available at https://ssrn.com/abstract=3415529.

Human rights is a topic of high importance in Western societies, and discrimination has been noted as a determining force in their violations. Films depicting human rights issues have been discussed as instrumental in bringing these matters to the attention of the general public and students. Their exposure is dependent largely on their age-classifications by movie advisory boards which determine who can watch them. Two studies were conducted to assess how films depicting human rights issues and held exemplary by the Political Film Society (PFS) are evaluated by movie advisory boards, providing justifications for their age-classifications. Study 1 found that the boards in the US and the UK identify these movies as suitable mainly for adults, while in Australia, in most cases, moviegoers are to decide their appropriateness. Each board stresses different contents as their main concerns, yet none mention discrimination. Study 2, assessing Netherland's NICAM evaluations, revealed that these movies are considered suitable mainly for adults, primarily because they are heavy with violence and fear arousing contents, with only some noted to include discriminatory contents. Thus, in these liberal-democratic societies, human rights movies considered of high value, in most cases are removed from the educational arena.

Benigni's Life is Beautiful gained a controversial reputation, yet managed to locate itself as one of the main pillars of Holocaust cinema of the recent decades. Prior studies had addressed the movie's reception among academics, professional movie critics, and to lesser extent, university students. Here, the perspectives of North American non-professional online movie reviewers were assessed, as this group gains an increasing role in shaping the ways consumers of goods, including cultural goods, relate to various products. These reviewers were found to be very favorite of the movie, and especially emphasized its' emotional appeal and capability to bring viewers to experience deep reflective processes, and point these characteristics to be the most crucial elements of the movie which should bring potential consumers to watch it. Future studies are needed to find how non-professional online movie reviewers of other nationalities react to the movie, as well to other Italian films reaching the global audience.

This is a pre-analysis plan for The Reg SHO Reanalysis Project, in which we will reassess primary results from selected recent accounting and finance papers, which exploit the randomized trial conducted by the Securities and Exchange Commission (SEC) from May 2, 2005 to July 6, 2007. As part of this trial, the SEC selected every third stock on the Russell 3000 index, based on trading volume during the year before the experiment was announced, and exempted these firms’ shares from the short-sale uptick rule and the test. Early studies of the experiment found minor effects on trading markets (e.g., SEC Office of Economic Analysis (2007), Diether et al (2009)), and led the SEC to rescind these short-sale restrictions. However, more recently, a large body of research has documented evidence for a wide variety of outcomes from the experiment, including increased open short interest, negative returns, reduced investment, reduced earnings management, increased audit fees, and much more. We undertook this project because we viewed most of these outcomes as implausible, given the modest expected impact of the short-sale restrictions on trading markets, limited publicity about the experiment (with no opposition from the affected firms that we could find), and early research consistent with small effects. In this proposed project, we will reassess three prominent, recent studies: Fang, Huang and Karpoff (2016), Grullon, Michenaud and Weston (2015), and Hope, Hu, and Zhao (2017). This pre-analysis plan provides details on our sample selection and the specific analyses we plan to carry out for the main results found in these three papers.

Many multicultural education classes include popular movies in their study material. Here were examined the age-classifications and their justifications for movies recommended by the American organization Teachers Against Prejudice (TAP) to be shown during high school multicultural classes, as assigned by the American, British, Australian movie advisory boards. Findings indicate that some of the movies chosen by TAP are deemed suitable only for adult moviegoers, most notably by the American and the British boards, and that these movies are loaded with profanity and violence.

Films depicting individuals dealing with mental health have not been discussed from the viewpoint of movie advisory boards, the entities informing moviegoers of potential inappropriate contents included in films. Movies considered best by the Center for Mental Health Services were investigated for age-classifications and their justifications. All of the boards investigated, chosen as they provide some sort of justification for the age-decisions, cited profanity as their main concern. In the US, the UK, Ireland, Hong Kong and Singapore, these movies are mainly considered suitable for adult moviegoers, while the Australian and Dutch boards are far more lenient.

We examine whether the reinvestment choices of public pension funds (PPFs) affect the governance of venture capital funds. We start with a hand-collected dataset of litigation against venture capitalists (VCs) that provides significant shocks to the reputation of VCs. We combine that information with detailed data on limited partner investments in VCs provided by LP Source and test whether PPFs respond differently to the litigation shocks compared to other types of limited partners. Our triple-difference framework reveals that VCs who were defendants in lawsuits suffer a significant subsequent decline in investment by university endowments and several other types of institutional investors, but experience an increase in the investment share of PPFs. Pension funds are about three times more likely to re-invest in post-lawsuit funds offered by litigated VCs. The additional pension fund investments thus partially compensate for the shortfall in post-lawsuit fundraising caused by the exodus of other investors. Our results indicate that the investment choices of PPF managers reduce the effectiveness of reputational penalties imposed by other limited partners in venture capital funds.

We examine the response of different types of Limited Partners (LPs) to alleged opportunistic behavior on the part of Venture Capitalists (VCs). We use a sample of litigated VCs (identified by Atanasov, et al, 2012, Journal of Finance) to proxy for VC opportunistic behavior. Based on their presumed sensitivity to VC malfeasance and headline risk, we predict that university endowments and economic development authorities will be most likely to respond negatively to potential bad press. To test our hypothesis, we employ differences-in-differences (DiD) analysis and compare the participation of different types of LPs in VC funds before and after litigation relative to the LPs of otherwise similar, matched VCs that are not subject to litigation. We find that endowments reduce by more than 50% their participation in follow-on investment funds offered by litigated VCs relative to other types of LPs. Our results suggest that the threat of university endowment withdrawal of funding can deter VC opportunism.

Electoral democracy is in crisis. The use of sortition in our political systems could be a key to renewing and deepening democracy. But how to do so? And where to start? In this paper, I explore the idea that using sortition to address the problem of corruption could be a first step. Why? For two reasons. First, corruption of elected officials is an internal inconsistency of electoral democracy – it cannot be resolved adequately through electoral institutions. Second, there is also a large consensus on the fact – everybody agrees – that corruption is a problem. I suggest granting the power to convene an Investigation Commission to a randomly selected citizen body. This body should also nominate the Commission’s head and receive its recommendations. I also discuss the idea of a Citizens’ Court to directly address the problem of corruption of elected officials. This broad jury would judge and sanction corrupted elected officials. Taking Quebec’s ongoing corruption saga as an example, I also try to see how the system would work in reality and, finally, where the system, once put into place, could lead to.

This paper develops a new, market-based measure of firm-level governance: the degree of correlation between the price of a firm’s minority shares and the market value of firm assets (“beta”). The goal is to capture the extent to which insiders (managers or controllers) translate the value of firm’s assets into the value of minority shares. I hypothesize that insiders vary the levels of asset diversion over time: when the value of firm assets is high, minority investors are content, and insiders divert a higher portion of assets to themselves; when the value of firm assets declines, minority investors start monitoring more closely, and insiders reduce the levels of asset diversion. Thus, firms with lower levels of asset diversion should have a higher correlation between the value of minority shares and the market value of assets. I test this hypothesis on a large panel of oil-producing companies around the world and find supporting evidence. Firms with higher Tobin’s Q have higher betas, as do firms incorporated in Delaware (both proxies for better governance). Firms from countries with better institutional environment have higher betas, both in time series and in cross-section. As country-level institutional environment improves over time, betas rise. I also find evidence inconsistent with the popular “bonding” hypothesis and consistent with the alternative “self-selection” hypothesis: firms from countries with poor regulatory regimes that subject themselves to US or UK regulation by cross-listing on US or UK exchanges have betas more sensitive to changes in their domestic environments than firms from the same countries that did not cross-list.

We use the best available longitudinal dataset, the Health and Retirement Survey, and a battery of causal inference methods to provide both central estimates and bounds on the effect of health insurance on health and mortality among the near elderly (initial age 50-61) over an 18-year period. Those uninsured in 1992 consume fewer healthcare services, but are not less healthy and, in our central estimates, do not die sooner than their insured counterparts. We discuss why a zero average effect of uninsurance on mortality and health is plausible, some selection effects that might explain our full results, and methodological concerns with prior studies.The Appendix that accompanies this article is available on SSRN at http://ssrn.com/abstract=2758692.

This article was a university paper written by David Poulin-Litvak at the Ecole nationale d’administration publique in 2004. It has mainly a historical interest, in that it presents the first version of his political thought relative to sortition. In this paper, Poulin-Litvak suggests creating a “Citizens’ Assembly” endowed with the power to propose constitutional amendments to the people in referendum. This idea will become the cornerstone of his political thought on sortition, leading him to suggest a new type of regime, which he brands “citizens’ democracy”. Cet article etait initialement un travail universitaire ecrit par David Poulin-Litvak a l’Ecole nationale d’administration publique en 2004. Son interet est surtout historique, en ce qu’il presente le premier jalon de ce qui deviendra sa pensee politique relative a l’utilisation de la selection aleatoire en politique. Dans ce travail, l’auteur suggere de mettre en place une « Assemblee citoyenne » dotee du pouvoir de proposition referendaire en matiere constitutionnelle. Cette idee deviendra la pierre d’assise de sa pensee politique, et le fondement premier d’un nouveau type de regime qu’il baptise la « democratie citoyenne ».

A few authors have suggested re-introducing random selection in politics. In the United States, Callenbach and Phillips have proposed replacing the House of Representatives by a Representative House. In this article, the author suggests that perhaps, in the specific US context, it would be worthwhile considering replacing both Houses of Congress by randomly selected Houses.

In this article, Poulin-Litvak suggests a new constitutional framework for the UK. This model is his reply to Sutherland’s proposal expounded in A People’s Parliament. He suggests adding to the British Parliament a People’s House which would have final say on all legislative matters. The existing houses would propose and advocate law, but the People’s House would be the sole body voting on the bills. He also suggests that the prime minister be directly elected by the people via a “deliberative primary”. He suggests electoral systems for the PM, the Commons and the Lords, as well as a new type of voting system for the legislative process in the People’s House.

I use a natural experiment to identify the effect of labor characteristics on firms’ investment and financial structure. The 1986 immigration reform applied simultaneously to all US firms, significantly increasing the costs of employing undocumented workers, and reducing the pool of potentially available workers currently living abroad. However, not all firms were affected equally: firms located in areas with high levels of immigration used more undocumented labor and therefore experienced a stronger shock to their labor costs and labor characteristics. Likewise, firms from industries that heavily rely on labor of undocumented workers (agricultural production, construction, accommodation and food services) were hit harder than firms from other industries. Using the difference-in-differences approach, I find that after the 1986 immigration reform, firms located in counties with higher levels of immigration significantly reduced their capital investment, dividend payments, debt maturity, cash holdings, and the number of employees, as compared to the control group of firms located in counties with lower levels of immigration. Firms from higher-immigration counties also significantly increased leverage. The changes were concentrated in industries heavily reliant on labor of undocumented workers, whereas industries not using many undocumented workers did not exhibit the same patterns. Other proxies for the use of illegal labor point to the same direction. For a given level of immigration in a county, firms located in counties with higher levels of private-sector union penetration experienced weaker changes in investment patterns. This evidence is consistent with the view that labor market characteristics affect firms’ financial decisions.

Felix Adler was the founder of the Ethical Culture Society. This short study analyses a New York Times article on a conference given by Adler in 1880 on the subject of social reform. In this conference, given at a time where there was no income tax in the United States, Adler proposed a graded tax on incomes in response to J.S. Mill’s flat tax proposal. However, Adler also pushed the logic of progressivity to its natural outcome and suggested an income cap, a tax-bracket at which the rate of taxation is 100 %. To my knowledge, this is the first documented proposal for an income cap, what is sometimes referred to nowadays as a “maximum wage”.

This paper uses a natural experiment to shed light on several key questions in securities law - the value of disclosure rules, the beneficiaries of disclosure, and the extent to which low-disclosure markets may deviate from semi-strong market efficiency. On November 6, 2006, the Pink Sheets announced that in May 2007, it would introduce a new classification system: each company would receive a simple sign, reflecting its level of disclosure (including “skull and bones” for firms investigated for fraud; a “stop” traffic sign for firms with no disclosures; a “premier” sign for highly-disclosing firms). The new system would not generate any new information - it would merely summarize already public information in one sign. In the event study of stock market returns, I find that the firms that in May 2007 were assigned into “low-disclosing” categories experienced significant negative returns (7% to 16% decline) following the November 2006 announcement of the upcoming classification, relative to OTC firms that received a “transparent” sign. I also analyze non-disclosure-based predictors of the Pink Sheets classification, and the extent to which investors may have relied on such indirect proxies in their trading. Overall, these results suggest that: (1) prominent summaries of public information can affect stock prices of OTC companies; (2) sophisticated investors predicted subsequent placement of firms into categories and thus were aware of existing levels of disclosure; (3) sophisticated investors expected the new summary disclosure system to affect decisions by unsophisticated investors; (4) sophisticated investors did not expect the new classification to significantly affect the behavior of firms’ insiders; and (5) disclosure by self-regulatory organizations can significantly affect financial markets. This evidence also indicates that prior to the new system, “dark” firms’ prices departed significantly from semi-strong efficiency.

This paper studies the relationship among the U.S. securities laws, the premia that non-U.S. firms obtain by subjecting themselves to U.S. laws, overall U.S. share prices, and a cross-listed firm’s U.S. trading volume. I report three main sets of findings. First, for exchange-traded (NYSE and NASDAQ) cross-listed firms, pair premia and pair returns (premia and returns not explained by valuation and returns for similar non-cross-listed firms from the same home country) are strongly correlated with U.S. stock indices. There is a visually apparent “bubble” in pair premia for these firms, which peaks in early 2000, at the same time as U.S. stock indices. In contrast, pair premia and pair returns for cross-listed firms traded OTC or on PORTAL are not correlated with U.S. indices. The correlation between pair returns and U.S. indices only exists for firms with an above-median ratio of U.S.-based to total trading volume, and is triggered by cross-listing; there is no significant correlation before listing. Second, pair premia for level-23 firms, relative to premia for level-14 firms (“relative pair premia”), exist only in firms with above-median ratio of U.S. to total trading volume. Firms with below-median ratio of U.S. trading have no relative pair premia, regardless of listing level. Third, there are important time variations in relative pair premia. Relative pair premia decline significantly for all firms during the first 6 years after listing, and disappear after year six. The decay is most pronounced for firms with below-median ratio of U.S. trading volume. These results, taken together, weaken the law-based explanation for cross-listing premia (bonding to U.S. securities regime) and strengthen the non-law-based explanations (liquidity and visibility). They also suggest a behavioral explanation: U.S. investors treat high trading volume, exchange traded firms partly like U.S. firms, but treat OTC firm, Portal firms and low-trading-volume exchange-traded firms like other foreign firms.

Prior studies find that foreign firms subject to the Sarbanes-Oxley Act ("SOX") suffered significant declines in market valuation; these declines are too large to be fully explained by the increased costs of direct compliance. This paper investigates one possible source of losses - the charge that SOX discourages corporate risk-taking. I use a triple difference methodology to estimate the effect of SOX on risk-taking by SOX-exposed foreign firms. I match each foreign cross-listed firm to a similar non-cross-listed firm from the same country based on propensity to cross-list. I measure the "pair" risk - the difference between the risk of a cross-listed firm and the risk of its match (first difference). I then estimate the after-minus-before SOX change in pair risk (second difference). Finally, I compare the after-minus-before changes in pair risk for SOX-exposed pairs (where the cross-listed company is listed on level 2 or 3 and is thus subject to SOX) to the change for SOX-unexposed pairs (where the cross-listed company is listed on level 1 or 4 and is thus not subject to SOX) (third difference). I use three sets of proxies for risk: volatility of returns, financial leverage, and cash hording. I find that the risk of SOX-exposed foreign firms declined significantly after SOX on all three measures. High-Tobin's Q firms suffered larger declines in risk. Firms that were riskier before SOX lost more of their value after SOX. This evidence is consistent with the view that SOX induced cross-listed firms to take fewer risks, and placed a particular burden on riskier and better-governed firms.

In November 2006, the Pink Sheets trading system announced the introduction of new disclosure "categories" for all of its companies, proclaiming that "categorizing securities by their level of disclosure will greatly enhance the capital formation process." The new system does not add new disclosure requirements; instead, it simply attaches an easy-to-read sign to each firm based on the existing level of disclosure (a "skull and bones" sign for firms investigated for fraud and spamming their stock; a "stop" sign for firms with no disclosures; a "premier" sign for highly-disclosing firms, and so forth). In the event study of stock market returns surrounding the announcement of the new categorization plan, I find that the "premier" (most-disclosing) category of firms experienced significant positive abnormal returns (24% increase) after the announcement; the category with only limited disclosures experienced significant negative abnormal returns (15% decline). The worst category, firms that have been investigated for fraud, experienced only insignificant declines. These results are consistent with the view that prominent displays of already-known information may affect stock prices, even when such displays add nothing substantively new to the information that is already released to the market. This adds to the growing body of literature studying investors' ability to understand publicly available information.

We explore the potential for abuse of startup founders and other common stock shareholders by venture capitalists. We first analyze a set of 26 lawsuits involving venture capitalists and entrepreneurs. Our analysis of lawsuits reveals that VC-related litigation is almost always initiated by founders, and most common allegations are dilution and freezeout of founders, followed by expropriation of company assets via related-party transactions. We document that most of the lawsuits that were not promptly settled end up dismissed by judges on procedural grounds, and yet, after winning, the involved VCs have raised significantly less capital than their peers and have syndicated deals with less reputable partners. We next analyze the founder ownership at the going-public stage in a sample of 390 VC-backed IPOs. We find that founders are less likely to be involved in firm governance and have lower ownership in startups backed by less reputable VCs and where VC investment rounds have been insider dominated. The results suggest that the potential for expropriation of equity holders in venture-backed startups has important implications for entrepreneurial activity.

This essay is prepared for a symposium Bloggership: How Blogs are Transforming Legal Scholarship, held at Harvard Law School on April 27, 2006. It makes three brief points. First, before we ask whether blogs are transforming legal scholarship, we need to put things in perspective. When compared to the impact of other recent developments (availability of data, influx of Ph.D's into the legal academy, long-distance co-authorship, internationalization of legal scholarship and faculties, shift of practitioner-oriented writing to practitioner authors, and so forth), the impact of blogging looks rather pale. Second, I address a popular argument that blogs, like water cooler conversations, affect legal scholarship in many indirect yet important ways - by creating forums for early-stage work. I suggest that blogs are more accurately analogized to bugged water coolers (gathering places that are clearly and openly outfitted with powerful microphones) and ask how the availability of a bugged water cooler may change legal scholarship. Finally, I argue that a successful forum for early ideas must have one of the two properties: privacy or well-specified rules punishing the silence of participants. Bugged water coolers have neither and thus are not likely to succeed in transforming legal scholarship.

This paper has two main components: methodological and substantive. Methodologically, it develops a new way of measuring and coding contractual, statutory, and regulatory variables through series of Monte-Carlo simulations. Substantively, it tests whether the extent to which a firm locks in its capital is related to the level of agency costs. In a study of lock-in choices of venture capital funds, I find that the degree of capital lock-in is inversely related to several measures of expected agency costs. Better venture organizations (the ones with fewer failed and more succeeded companies) lock their capital more tightly, as do funds where managers' compensation is more heavily based on performance and funds that employ alternative governance devices.

When investors sign venture capital partnership agreements, they do not immediately turn over the entire committed capital. Instead, they contribute capital in stages, as needed by the fund. Typically, investors have at least three years to decide whether to honor their commitment obligations fully. To discourage investor defaults, venture funds employ a complicated system of financial penalties. Since venture funds could have eliminated the default problem altogether by demanding the contribution of the entire amount upfront, the question arises: why do venture funds engage into this elaborate staging scheme? I suggest that staged contributions are used as a governance tool: the threat of investor walkaway creates additional incentives for venture capitalists to perform well. The walkaway right, however, comes at a cost of undermining a fund's liquidity and threatening its ability to make investments in a timely fashion. Thus, my hypothesis predicts that the strength of investor walkaway right represents a tradeoff between governance concerns and liquidity concerns. I test this hypothesis by studying venture capital partnership agreements. I find that the strength of investor walkaway right is strongly and positively related to several measures of expected agency costs. Venture funds where managerial compensation is riskier and more heavily tilted toward performance-based component make capital withdrawals more difficult. Larger venture funds (typically run by more prominent managers, who generate fewer mismanagement concerns) give investors weaker walkaway rights.