Spring 2023 Blue Sky Talks

February 22, 2023 (Wed)
12:10 PM

Ido Baum

Senior Lecturer,
Haim Striks Faculty of Law

Visiting Faculty,
Columbia Law School

Talk Location

Jerome Greene Hall, room 602

Does wedge size matter?
Financial reporting quality & effective regulation of dual-class firms

Dual-class capital structures create a gap (“wedge”) between voting and cash flow rights. Our analysis indicates that the larger the wedge, the higher the quality of financial reporting, reflecting a tradeoff between the dilution of voting rights and enhancement of the credibility of information provided to investors. It suggests that increasing management’s insulation from the market for corporate control is stronger than agency costs, reducing motivation to manipulate earnings. Moreover, better quality reporting allows for attracting second-class investors who agree to a larger wedge. Therefore, concerning financial reporting, a nuanced regulation restricting wedge size may not be more effective.

April 5, 2023 (Wed)
12:10 PM

Anat Admati

The George G.C. Parker Professor of Finance and Economics,
Stanford Graduate School of Business

Professor of Economics (by courtesy),
Stanford School of Humanities and Sciences

Senior Fellow,
Stanford Institute for Economic Policy Research

Talk Location

Jerome Greene Hall, room 602

“Too Big to Fail” and the Economics and Politics of Capital Regulations

I will discuss the economic rationale and desired design of capital regulations meant to constrain the funding choices of banks, the politics around these regulations and whether capital regulations and resolution planning have eliminated bank bailouts. The talk will be based on past writings and on new material for a forthcoming edition of The Bankers New Clothes: What’s Wrong with Banking and What to Do About It (with Martin Hellwig), Princeton University Press. 

(Past writings include, for example, “The Leverage Ratchet Effect” (with Peter DeMarzo, Martin Hellwig and Paul Pfleiderer), Journal of Finance, 2018, and “Bank Leverage, Welfare, and Regulation,” (with Martin Hellwig), in Systemic Risk in the Financial Sector: Ten Years After the Great Crash, Douglas W. Arner, Emilios Avgouleas, Danny Busch and Steven L. Schwarcz (editors), CIGI Press, 2019.)

April 12, 2023 (Wed)
12:10 PM

Horst Eidenmueller

Statutory Professor for Commercial Law,
St. Hugh's College, Oxford University Law Faculty

Talk Location

Jerome Greene Hall, room 807

Bailout Blues: The write-down of the AT1 Bonds in the Credit Suisse Bailout

No paper link; work in progress.

In the talk, I will discuss a forthcoming Blue Sky Blog (together with Javier Paz Valbuena) on the write-down of the AT1 Bonds in the Credit Suisse bailout. The bonds were written down even though Credit Suisse’s shareholders were not completely wiped out. We analyse the motives and mechanics of the write-down and argue that the prospect for a legal challenge is slim. At the same time, we question the merits of the write-down. Bondholders should fare no worse than common equity, regardless of whether a financial institution is put in an insolvency/liquidation proceeding or bailed out, and the applicable bond terms should reflect this. We also raise the issue of a more principled approach to bailouts more generally.