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Heyes and Saberian (2019b) estimate from 2000–2004 data that outdoor temperature reduces US immigration judges’ propensity to grant asylum. This estimate is the result of coding and data errors and of sample selection. Correcting the errors reduces the point estimate by two-thirds, with a wide 95 percent confidence interval straddling zero. Enlarging the sample to 1990–2019 flips the point estimate’s sign and rules out the effect size reported by Heyes and Saberian with very high confidence. An analysis of all criminal sentencing decisions by US federal district judges from 1992 to 2003 yields no evidence of temperature or other weather effects either. (JEL K37, K41, Q54)

This article argues that the key mechanisms protecting portfolio investors in public corporate securities are indirect. They do not rely on actions by the investors or by any private actor charged with looking after investors’ interests. Rather, they are provided by the ecosystem that investors (are legally forced to) inhabit, as a byproduct of the self-interested, mutually and legally constrained behavior of third parties without a mandate to help the investors such as speculators, activists, and plaintiff lawyers. This elucidates key rules, resolves the mandatory versus enabling tension in corporate/securities law, and exposes the current system’s fragile reliance on trading.

In a pre-registered 2 × 2 × 2 factorial between-subject randomized lab experiment with 61 federal judges, we test if the law influences judicial decisions, if it does so more under a rule than under a standard, and how its influence compares to that of legally irrelevant sympathies. Participating judges received realistic materials and a relatively long period of time (50 min) to decide an auto accident case. We find at best weak evidence that the law matters or that rules constrain more than standards, and no evidence of a sympathy effect. (JEL K00, K13, K40, K41)

We experimentally study the decision-making process of judges in China, where judges are specifically prohibited from citing prior decisions as the basis for their judgments, and where, in past surveys, most judges explicitly stated that precedent played at most a marginal role in their decisions. In an experiment resembling real-world judicial decision making, we find, however, that precedent seems to have a significant influence on the decisions of the participating Chinese judges. Indeed, judges spend more time reading prior cases than statutes, and they typically read precedents before they access the statutes. On the other hand, judges rarely mention the precedent in their reasons. Our findings suggest that the Chinese judiciary operates much more similarly to its homologues in the United States and elsewhere than their written opinions and much folklore would suggest.

William Eskridge and Lauren Baer’s (96 G eo . L.J. 1083 (2008)) “empirical study of all 1014 Supreme Court cases between Chevron and Hamdan in which an agency interpretation of a statute was at issue” finds that “the Court does not apply the Chevron framework in nearly three-quarters of the cases where it would appear applicable.” Our reexamination of this study finds that the fraction of such cases is far lower, and indeed closer to zero. Our main methodological innovation is to infer Chevron applicability from Supreme Court litigants’ briefs rather than our own evaluation of the cases’ facts, as in Eskridge and Baer’s study. In over half the cases flagged by Eskridge and Baer, neither of the parties (nor, where applicable, the Solicitor General as amicus) cited Chevron, and in almost half of the cases within that subset, no one argued for or against deference of any kind. In most of a sample of the remaining cases, the Supreme Court either did not need to reach the Chevron issue, or actually applied it, at least in an abbreviated form.

In our lab, 299 real judges from seven major jurisdictions (Argentina, Brazil, China, France, Germany, India, and USA) spend up to fifty-five minutes to judge an international criminal appeals case and determine the appropriate prison sentence. The lab computer (i) logs their use of the documents (briefs, statement of facts, trial judgment, statute, precedent) and (ii) randomly assigns each judge (a) a horizontal precedent disfavoring, favoring, or strongly favoring defendant, (b) a sympathetic or an unsympathetic defendant, and (c) a short, medium, or long sentence anchor. Document use and written reasons differ between countries but not between common and civil law. Precedent effect is barely detectable and estimated to be less, and bounded to be not much greater than, that of legally irrelevant defendant attributes and sentence anchors.

In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The Report purports to find evidence of debilitating short-termism in EU corporate governance and recommends many changes to support sustainable corporate governance. In this paper, we point out deep flaws in the Report’s evidence and analysis. We recently submitted the content of this paper in response to the European Commission’s call for feedback. First, the Report defines the corporate governance problem as one of pernicious short-termism that damages the environment, the climate, and stakeholders. But the Report mistakenly conflates time-horizon problems with externalities and distributional concerns. Cures for one are not cures for the others and a cure for one may well exacerbate the others. Second, the Report’s main ostensible evidence for an increase in corporate short-termism is rising gross payouts to shareholders (dividends and stock repurchases). However, the more relevant payout measure to assess corporations’ ability to fund long-term investment is net payouts (gross payouts minus equity issuances), which is much lower and has left plenty of funds available for long-term and short-term investment. Third, when the Report turns to other evidence for short-termism, it selectively picks academic studies that support its views on short-termism, while failing to engage substantial contrary literature. Significant studies fail to detect short-termism and some substantial studies show excessive long-termism. Conceptually, some short-termism is an unfortunate but an inevitable side effect of effective corporate governance and may not be a first-order problem warranting wholesale reform. Finally, the Report touts cures whose effectiveness has little evidentiary support and, for some, there is real evidence that the cures could be counterproductive and costly.

A popular research design identifies the effects of corporate governance by (changes in) state laws, clustering standard errors by state of incorporation. Using Monte-Carlo simulations, this paper shows that conventional statistical tests based on these standard errors dramatically overreject: in a typical design, randomly generated “placebo laws” are “significant” at the 1/5/10% level 9/21/30% of the time. This poor coverage is due to the extremely unequal cluster sizes, especially Delaware's concentration of half of all incorporations. Fixes recommended in the literature fail, including degrees-of-freedom corrections and the cluster wild bootstrap. The paper proposes a permutation test for valid inference.

We investigate experimentally if the law influences judges’ decisions in a run-of-the-mill traffic accident damages case. We design the case to be reasonably realistic in the sense that the experimental task resembled an actual decision that our experimental subjects might decide in real life, with similar prompts and materials. Sixty-one federal judges were given 50 minutes to read briefs and make a decision in a simulated tort case, where the outcome turned on choice of law and the applicability of one state’s cap on damages. Some judges were asked to decide the case under the traditional rule, which instructs judges to choose the law of the place where the accident occurred. Others were tasked with deciding under the Restatement Second’s open-ended standard, which selects the law of the place with the “most significant relationship” to the dispute. We also randomly varied legally irrelevant characteristics of the plaintiff and defendant to test if judges would be influenced by sympathy. We find that the applicable choice of law rule/standard does affect the judges’ decisions, although less than we anticipated, and even under the rule judges deviated from the correct answer almost one quarter of the time. Judges were not affected by sympathy, but they preferred to fully compensate injured plaintiffs, regardless of whether the plaintiff was sympathetic. Under the assumption that judges do not have choice of law preferences, our result can be interpreted as evidence that judges make the legally correct decision more often under the rule than under the standard.

Law students randomly assigned to represent one side in a legal argument in the classroom exhibit substantial role-induced prediction bias for their side within only 40 minutes of their role assignment. Reminding students that prediction requires a more neutral perspective than advocacy does not attenuate the bias. The bias occurs evenly in male and female participants, who also report equal confidence in their predictions.

We experimentally investigate the determinants of judicial decisions in a setting resembling real-world judicial decision making. We gave US federal judges 55 minutes to adjudicate a real appeals case from an international tribunal, with minor modifications to accommodate the experimental treatments. The fictitious briefs focused on one easily understandable issue of law. Our 2 × 2 between-subject factorial design crossed a weak precedent and legally irrelevant defendant characteristics. In a survey, law professors predicted that the precedent would have a stronger effect than the defendant characteristics. In actuality, the precedent had no detectable effect on the judges’ decisions, whereas the two defendants’ affirmance rates differed by 45 percent. Judges’ written reasons, on the other hand, did not mention defendant characteristics, focusing instead on the precedent and other legalistic and policy considerations.

Preemptive rights are thought to protect minority shareholders from cheap-stock tunneling by a controlling shareholder. We show that preemptive rights, while making cheap-stock tunneling more difficult, cannot prevent it when asymmetric information about the value of the offered shares makes it impossible for the minority to know whether these shares are cheap or overpriced. Our analysis can help explain why sophisticated investors in unlisted firms and regulators of listed firms do not rely entirely on preemptive rights to address cheap-stock tunneling, supplementing them with other restrictions on equity issues.

I review the empirical comparative law literature with an emphasis on quantitative work. After situating the field and surveying its main applications to date, I turn to methodological issues. I discuss at length the obstacles to causal inference from comparative data, and caution against inappropriate use of instrumental variables and other techniques. Even if comparative data cannot identify any single causal theory, however, they are extremely important in narrowing down the set of plausible theories. I report progress in measurement design and suggest improvements in data analysis and interpretation using techniques from other fields, particularly growth econometrics.

This paper compares actual U.S. crime and incarceration rates to predicted rates from cross-country regressions. Global cross-country regressions of crime and incarceration on background characteristics explain much of the variation between other countries. But the estimated models predict only one-fourth of U.S. incarceration and not all of U.S. crime. The coincidence of the non-negative U.S. crime residuals with the very large positive U.S. incarceration residual constitutes a puzzle. The two pieces fit together only if the residual U.S. incarceration does not contribute to a reduction in crime, except to the extent an omitted criminogenic factor pushes up U.S. crime. The paper quantifies this relationship. Drawing on additional evidence from comparative and U.S.-specific data, it argues that the puzzle's most plausible solution combines low effectiveness of mass incarceration with omitted criminogenic factors such as U.S. neighborhood segregation.

This comment points out four severe reservations regarding Cho et al.’s (PS 2017) finding that U.S. federal judges punish more harshly on “sleepy Mondays,” the Mondays after the start of Daylights Savings Time. First, Cho et al.'s finding pertains to only one of at least two dimensions of harshness, and the opposite result obtains in the second dimension. Second, even within the first dimension, Cho et al.'s result is statistically significant only because of a variable transformation and sample restrictions that are neither transparent in the article nor theoretically sound. Third, reanalysis of the data with superior methods reveals no significant “sleepy Monday” effect in the years 1992- 2003. Fourth, sentences were on average shorter on “sleepy Mondays” out of sample, namely in 2004-2016.

The Supreme Court has looked to the rights of corporate shareholders in determining the rights of union members and non-members to control political spending, and vice versa. The Court sometimes assumes that if shareholders disapprove of corporate political expression, they can easily sell their shares or exercise control over corporate spending. This assumption is mistaken. Because of how capital is saved and invested, most individual shareholders cannot obtain full information about corporate political activities, even after the fact, nor can they prevent their savings from being used to speak in ways with which they disagree. Individual shareholders have no “opt out” rights or practical ability to avoid subsidizing corporate political expression with which they disagree. Nor do individuals have the practical option to refrain from putting their savings into equity investments, as doing so would impose damaging economic penalties and ignore conventional financial guidance for individual investors.Most individual shareholders cannot obtain full information about a corporation’s speech or political activities, even after the fact, nor can most shareholders prevent their savings from being used for political activity with which they disagree. More generally, the Court's focus on whether union non-members are effectively forced to fund political speech or activity with which they disagree should reflect the fact that most Americans must routinely fund speech with which they disagree. While some of this compulsion is from practical reality rather than law there are numerous examples outside the union context of laws that require individuals to fund expressive activities. There is, simply put, very little way for most individuals in modern America to avoid subsidizing speech with which they disagree.

Economists have documented pervasive correlations between legal origins, modern regulation, and economic outcomes around the world. Where legal origin is exogenous, however, it is almost perfectly correlated with another set of potentially relevant background variables: the colonial policies of the European powers that spread the “origin” legal systems through the world. We attempt to disentangle these factors by exploiting the imperfect overlap of colonizer and legal origin, and looking at possible channels, such as the structure of the legal system, through which these factors might influence contemporary economic outcomes. We find strong evidence in favor of non-legal colonial explanations for economic growth. For other dependent variables, the results are mixed.

The "antidirector rights index" has been used as a measure of shareholder protection in over a hundred articles since it was introduced by La Porta et al. ("Law and Finance." 1998, Journal of Political Economy 106:1113--55). A thorough reexamination of the legal data, however, leads to corrections for thirty-three of the forty-six countries analyzed. The correlation between corrected and original values is only 0.53. Consequently, many empirical results established using the original index may not be replicable with corrected values. In particular, the corrected index fails to support three widely influential claims: that shareholder protection is higher in common than in civil law countries; that shareholder protection predicts stock market size or ownership dispersion; and that weak corporate governance explains the extent of exchange rate depreciation during the Asian financial crisis of 1997--1998. The Author 2009. Published by Oxford University Press [on behalf of The Society for Financial Studies]. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

A substantial body of comparative legal scholarship considers statements applicable to large, conceptually infinite numbers of countries. Such statements gain in credibility if they are supported by evidence from large samples of countries. Processing such vast evidence requires quantitative methods. Designing the requisite numerical measures of law is not straightforward, but an important insight from statistics suggests that this problem can be overcome by appropriate research design. While in practice considering more countries comes at the expense of less information per country, on balance large sample, quantitative research designs promise to yield interesting insights for comparative law.

It is generally assumed that trade retaliation under the WTO performs some kind of 'rebalancing' by allowing the injured Member to suspend 'concessions and obligations' vis-a-vis the violating Member of a level equivalent to the level of 'nullification and impairment' suffered by the injured Member. This article argues that this perception is misguided. The article first questions if a sensible comparator exists with which equivalence for purposes of 'rebalancing' could be evaluated. It then argues that WTO arbitration decisions do not even succeed in their limited goal of providing for retaliation that will affect trade in the same amount as the WTO-inconsistent measure at issue. One reason is the use of an asymmetric and underspecified trade effects comparator. The other reason is very significant miscalculation of the trade effects of the violation, as shown by detailed legal-economic analysis of all relevant arbitration decisions. The decisions concerning countermeasures against prohibited export subsidies do not make any attempt at 'rebalancing' in the first place. The article considers political explanations of arbitration decisions. It concludes with some suggestions for improvement. Copyright 2006, Oxford University Press.

This paper compares actual US crime and incarceration rates to predicted rates from cross-country regressions. Global cross-country regressions of crime and incarceration on background characteristics explain much of the variation between other countries. But the estimated models predict only one-fourth of US incarceration and not all of US crime. The coincidence of the non-negative US crime residuals with the very large positive US incarceration residual constitutes a puzzle. The two pieces fit together only if the residual US incarceration does not contribute to a reduction in crime, except to the extent an omitted criminogenic factor pushes up US crime. The paper quantifies this relationship. Drawing on additional evidence from comparative and US-specific data, it argues that the puzzle's most plausible solution combines low effectiveness of mass incarceration with omitted criminogenic factors such as neighborhood segregation.

This paper exposits a model of parallel trading of corporate securities (shares, bonds) and derivatives (TRS, CDS) in which a large trader can sometimes pro…tably acquire securities with their corporate control rights for the sole purpose of reducing the corporation’s value and gaining on a net short position created through o¤-setting derivatives. At other times, the large trader pro…tably takes a net long position. The large trader requires no private information beyond its own trades. The problem is most likely to manifest when derivatives trade on an exchange and transactions give blocking powers to small minorities, particularly out-of-bankruptcy restructurings and freezeouts.

Legal origin cannot explain economic growth. Although common law countries have experienced higher growth rates since 1960, this advantage disappears when one controls for the dominant pre-independence colonial power or for human capital in 1960. Legal origin and colonial history are strongly correlated. Nearly all common law countries are former English colonies, and nearly all civil law countries were colonized by France, Spain or Portugal. Therefore, unless one controls for other aspects of colonial policy - such as education - differences between countries are likely to be misattributed to differences in their legal systems. In addition, the process of colonization was not random. Apparent differences in the economic performance of former colonies may be explicable as effects of initial geographic and climatic conditions.

I investigate in parallel the cross-country determinants of crime and punishment in the largest possible sample of countries with data on homicides, victimization by common crimes (ICVS), incarceration rates, the death penalty, and constructed measures of prisoners per crime. I find that income inequality, the current teen birth rate, and lower levels of development are associated with more crime, while common law legal systems, (formerly) socialist systems, and moderate levels of development are associated with more prisoners; common law systems are also more likely to retain the death penalty. Unlike the previous literature, I find no support for links between crime and democracy, between crime and the children of teenagers, or, outside the richest countries, between incarceration rates and political structure and social policy. While models with a small number of plausible covariates predict much of the variation of homicide and incarceration rates between major developed countries, they predict only one seventh of the actual US incarceration rate.

The Antidirector Rights Index from La Porta et al.'s Law and Finance (1998) has been used as a measure of shareholder protection in almost 100 published studies. With articles by legal scholars questioning the accuracy of index values for several countries, I undertake a systematic study to verify these values for 46 countries with the help of local lawyers. My emphasis is on accuracy of the data; I do not change the original variable definitions. The study leads to a substantial revision: 33 of the 46 observations need to be corrected, and the correlation of corrected and original values is only .53. With accurate values, the well-known results of La Porta et al. (1997, 1998) no longer hold: accurate index values are neither distributed with significant differences between Common and Civil Law countries nor correlated with stock market size and ownership dispersion. All of the many results derived with the index will have to be revisited.

I re-code the "Antidirector Rights Index" (ADRI) of shareholder protection rules from La Porta et al. 1998 for 46 countries in 1997 and 2005 with the help of local lawyers. My emphasis is on consistent coding; I do not change the original variable definitions. Consistently coded ADRI values are neither distributed with significant differences between Common and Civil Law countries, nor predictive of stock market outcomes. The revision of the variable definitions in Djankov et al. 2005 salvages some of the original results, but reinforces severe endogeneity concerns regarding the index components that drive the remaining significant results. I review the other index components and conclude that the ADRI is unlikely to be a valid measure of shareholder protection. Results derived with the ADRI in the literature may have to be revisited. Along the way, I develop some general guidelines for consistent coding.

This paper tries to develop a general framework for choice-of-law in a federal system and an internal market. The framework consists of two elements: The first element is the criteria that should guide us in forging a choice-of-law rule, i.e., the answer to the question: How do we determine which choice-of-law rule is preferable? Recent European literature scrutinizes choice-of-law rules under the Dassonville/Cassis de Dijon test of Art. 28 EC, the parallel of the US Constitution's Dormant Commerce Clause, in the first ever intensive exploration of the influence of the concept of the internal market on choice-of-law. But this European literature overemphasizes a few "private interests", while largely ignoring the "state interests" involved, i.e., the horizontal power distribution of the federal system, an important element extensively addressed by the US literature. This paper joins these European and American ideas on a topic of common interest, to develop more sound criteria for forging choice-of-law rules in a system that is both federal and an internal market. The second element is the authority to make choice-of-law rules, i.e., the answer to the question: Who gets to determine which choice-of-law rule is right? In a federal system, this authority should be exclusively the union's. It should ideally be vested in the federal legislature, otherwise possibly in the federal courts. This paper agrees with a growing body of US literature that finds this ideal state to be embodied in the US Constitution. In Europe, authors merely advocate a federal control of state choice-of-law rules (under the EC Freedoms), but this seems to be no more than a third-best cost-inefficient substitute for the (supposedly) missing European federal law-making power in choice-of-law matters.

This paper empirically compares civil procedure in common-law and civil-law countries. Using World-Bank and hand-collected data, and unlike earlier studies that used predecessor data sets, this paper finds no systematic differences between common- and civil-law countries in the complexity, formalism, duration, or cost of procedure in courts of first instance. The paper further finds that by a subjective measure, contract enforceability in common-law countries is higher than in French, but lower than in German and Scandinavian, civil-law countries. Given civil procedure's central role for the common-civil-law distinction, these findings challenge the distinction's economic relevance.