Monthly Archives: October 2016

Earnings and the Value of Voting Rights

Umit Gurun is Professor of Accounting and Finance at the University of Texas at Dallas Naveen Jindal School of Management, and Oğuzhan Karakaş is Assistant Professor of Finance at Boston College Carroll School of Management. This post is based on their recent paper.

In our recent paper, Earnings and the Value of Voting Rights, we examine the impact of earnings announcements on the value of shareholder voting rights (i.e., voting premium). Earnings are associated with and indicative of the efficiency in the management of the company. We contend that earnings not only inform investors regarding the risky stream of cash flows (ownership role), but also influence the control rights by providing a benchmark for shareholders to express their concerns with corporate performance and to pressure management for corporate reform (control role). This dual role of earnings naturally maps into the separation of ownership and control functions in modern corporations.


Change You Can Believe In? Hedge Fund Data Revisions

Andrew J. Patton is the Zelter Professor of Economics and Professor of Finance at Duke University, and an Associate Member of the Oxford-Man Institute of Quantitative Finance. This post is based on a forthcoming article by Professor Patton; Tarun Ramadorai, Professor of Financial Economics at Imperial College London; and Michael Streatfield, Saïd Business School, University of Oxford.

What do we know about hedge funds?

Despite the miles of column inches devoted to the hedge fund industry in the financial and popular press, relatively little is known about their trading strategies, risk profiles, liquidity needs, or potential for impact on systemic risk. In the wake of the recent financial crisis, the Securities and Exchange Commission proposed a rule requiring U.S.-based hedge funds to provide regular reports on their performance, trading positions, and counterparties to a new financial stability panel established under the Dodd-Frank Act. A modified version of this proposal was implemented in 2012, and requires detailed quarterly reports for 200 or so large hedge funds (those managing over $US 1.5 billion) and less detailed, annual, reports for smaller hedge funds. The proposal makes clear that these reports are only available to the regulator, with no provisions in the proposal regarding reporting to funds’ investors or to the public more generally.


Delaware Court of Chancery: Merger Disclosure Claims Must Be Brought Pre-Closing

William Savitt is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton publication by Mr. Savitt, Anitha Reddy, and Nicholas Walter. This post is part of the Delaware law series; links to other posts in the series are available here.

The Delaware Court of Chancery yesterday held that claims challenging the sufficiency of merger disclosures should be pursued before the merger closes if they are to be pursued at all. An Nguyen v. Michael G. Barrett, et al., C.A. No. 11511-VCG (Del. Ch. Sept. 28, 2016).

The lawsuit challenged the disclosures issued by Millennial Media in connection with its 2015 acquisition by AOL. Before Millennial’s stockholders approved the merger, the plaintiff raised some thirty alleged disclosure violations, but sought pre-closing injunctive relief for just one. The court denied the injunction application and the transaction closed with the support of the overwhelming majority of Millennial’s stockholders.


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