This chapter provides a general framework to analyze regulation with a law and economics approach. It introduces the volume “Regulation and Economics” of the second edition of the Encyclopedia of Law and Economics. This study intends to provide a state-of-the-art overview of regulatory...

In this chapter, written for the book 'Law and Method. Interdisciplinary Research info Law', we describe the methodology of Law and Economics. We start by discussing the mainstream economic approach to law, including the topics of rationality, the use of (sometimes unrealistic) assumptions, the...

This article discusses hedge funds activism based on Hirschman's classic. It is argued that hedge funds do not create the loyalty concerns underlying the usual short-termism critique of their activism, because the arbiters of such activism are typically indexed funds, which cannot choose...

This essay discusses the economic case for regulating shadow banking. Focusing on systemic risk, shadow banking is defined as leveraging on collateral to support liquidity promises. Regulating shadow banking is efficient because of the negative externality stemming from systemic risk. However,...

The goal of this essay is to determine how – and to what extent – law and economics can be normative, namely inform policymakers about which legal rules are desirable for society. A review of the law and economics movement reveals three challenges. First, efficiency is not always sufficient...

This article studies the regulatory strategies to address the potential systemic risk of hedge funds operation in financial markets. Due to the implications of the choice of regulatory strategies and instruments in terms of mitigating systemic risk, the article focuses on one critical aspect of...

In publicly traded companies, related party transactions (RPTs) are an obvious vehicle for shareholder expropriation. However, they may also be efficient, particularly when they are motivated by transaction cost savings. This paper aims to identify which type of RPT review is not only effective...

The majority of commentators, along with the public opinion, are inclined to identify the causes of the last financial crisis in a combination of traditional market and regulatory failures in the operation and regulation of financial markets. Whatever cannot be explained along these lines is...

This paper is a comment on Henry G. Manne (2010), “Corporate Governance – Getting Back to Market Basics.” Professor Manne authoritatively contends that regulation should not tamper with corporate governance, because in so doing regulation undermines the efficiency of stock markets and of...

The standard approach to the legal foundations of corporate governance is based on the 'law matters' thesis, according to which corporate law promotes separation of ownership and control by protecting minority shareholders from expropriation. This paper takes a broader perspective on the...