A large body of work has examined the impact of corporate takeovers on the financial stakeholders (shareholders and bondholders) of the merging firms. Since the late 2000s, empirical research has increasingly highlighted the crucial role played by the non-financial stakeholders (labor, suppliers, customers, government, and communities) in these transactions. It is, therefore, important to understand the interplay between corporate takeovers and the non-financial stakeholders of the firm.
Financial economists have long viewed the firm as a nexus of contracts between various stakeholders connected to the firm. Corporate takeovers not only play an important role in redefining the broad boundaries of the firm but also result in major changes to corporate ownership and structure. In the process, takeovers can significantly alter the contractual relationships with non-financial stakeholders. Because the firm’s relationships with these stakeholders are governed by implicit and explicit contracts, circumstances can arise that allow acquiring firms to fully or partially abrogate these contracts and extract rents from non-financial stakeholders after deal completion. In contrast, non-financial stakeholders can also potentially benefit from a takeover if they get to share in any efficiency gains that are generated in the deal.
Given this framework, the ex-ante importance of these contractual relationships can have a bearing on the efficacy of takeovers. The ability to alter contractual relationships ex post can affect the propensity of a takeover and merging firms’ shareholders and, in turn, impact non-financial stakeholders. Non-financial stakeholders will be more vested in post-takeover success if they can trust the acquiring firm to not take actions that are detrimental to them. The big picture that emerges from the surveyed literature is that non-financial stakeholder considerations affect takeover decisions and post-takeover outcomes. Moreover, takeovers also have an impact on non-financial stakeholders. The directions of all these effects, however, depend on the economic environment in which the merging firms operate.
Article
Corporate Takeovers and Non-Financial Stakeholders
Daniel Greene, Omesh Kini, Mo Shen, and Jaideep Shenoy
Article
The Economics of Abortion Policy
Damian Clarke
The economic literature on abortion policy broadly is broad, studying abortion reforms that have occurred over the past two centuries, with a concentration of studies examining policy reform over the 20th and 21st centuries. The literature has examined a range of policies: both those which restrict access and those which legalize elective abortion; but within these two broad classes, the precise nature of policy reform can vary greatly. Policy reforms studied range from specific types of limits or financial barriers restricting access for particular age groups to policies which entirely criminalize or legalize elective abortion. Policies have been studied that restrict or relax individual access as well as impose regulations on abortion providers. The economic literature on abortion reform has illuminated a number of clear links, showing that increased availability of abortion decreases rates of unintended births, and vice versa when access to abortion is limited. These effects have been shown to have downstream impacts in many domains such as family formation, educational attainment, and labor market attachment, as well as impacts on health, empowerment, and broader measures of well-being such as life satisfaction and exposure to intimate partner violence.
There is mixed evidence when examining the impact that abortion reform has on cohorts of children exposed to reform variation. Across contexts abortion reforms have been shown to affect the composition of cohorts of children via differential rates of access to abortion, though this compositional effect is context-dependent, and as such a number of different patterns have been documented. Compositional effects of policies often also have been shown to have a geographic component, given that certain types of individuals are more easily able to travel to access abortion where restrictions are in place in one area but not in another.
Much of what is known in the economic literature on abortion is gleaned from country-level case studies and cohort variation in access, with this evidence generated from a relatively small number of countries in which reforms have occurred and data is available. In general, much of the literature available covers low fertility and industrialized settings. Additional evidence from other settings would allow for a broader understanding of how abortion reform affects well-being.
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Economic Theory of Criminal Law
Keith N. Hylton
Criminal law consists of substantive and procedural parts. Substantive law is the set of rules defining conduct that violates the law. Procedural criminal law is the set of rules regulating the process of punishment. Substantive rules apply mostly to individual actors, and procedural rules apply to public enforcement agencies and adjudicators.
Economic theory of criminal law consists of normative and positive parts. Normative economic theory, which began with writings by Beccaria and Bentham, aims to recommend an ideal criminal punishment scheme. Positive economic theory, which appeared later in writings by Holmes and Posner, aims to justify and to better understand the criminal law rules that exist. Since the purpose of criminal law is to deter socially undesirable conduct, economic theory, which emphasizes incentives, would appear to be an important perspective from which to examine criminal law.
Positive economic theory, applied to substantive criminal law, seeks to explain and to justify criminal law doctrine in economic terms—that is, in terms that emphasize the incentive effects created by the law. The positive economic theory of criminal law literature can be divided into three phases: Classical deterrence theory, neoclassical deterrence, and modern synthesis. The modern synthesis provides a rationale for fundamental criminal law doctrines and also more puzzling portions of the law such as the doctrines of intent and necessity. Positive economic theory also provides a rationale for the allocation of enforcement responsibilities.
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The Law and Economics of Employment Discrimination Law
Joni Hersch and Blair Druhan Bullock
The labor market is governed by a panoply of laws, regulating virtually all aspects of the employment relation, including hiring, firing, information exchange, privacy, workplace safety, work hours, minimum wages, and access to courts for redress of violations of rights. Antidiscrimination laws, especially Title VII, notably prohibit employment discrimination on the basis of race, color, religion, sex, and national origin. Court decisions and legislation have led to the extension of protection to a far wider range of classes and types of workplace behavior than Title VII originally covered.
The workplace of the early 21st century is very different from the workplace when the major employment discrimination statutes were enacted, as these laws were conceived as regulating an employer–employee relationship in a predominantly white male labor market. Prior emphasis on employment discrimination on the basis of race and sex has been superseded by enhanced attention to sexual harassment and discrimination on the basis of disability, sexual orientation, gender identity, and religion. Concerns over the equity or efficiency of the employment-at-will doctrine recede in a workforce in which workers are increasingly categorized as independent contractors who are not covered by most equal employment laws. As the workplace has changed, the scholarship on the law and economics of employment law has been slow to follow.
