Sarbanes-Oxley and the Cross-Listing Premium

This article tests whether the Sarbanes-Oxley Act ( SOX ) affected the premium that investors are willing to pay for shares of foreign companies cross-listed in the United States. I find that from year-end 2001 (pre-SOX) to year-end 2002 (after SOX adoption), the Tobin\u27s q and market/book ratios of foreign companies subject to SOX (cross-listed on levels 2 or 3) declined significantly, relative to Tobin\u27s q and market/book ratios of both (i) matching non-cross-listed foreign companies from the same country, the same industry, and of similar size, and (ii) cross-listed companies from the same country that are not subject to SOX (listed on levels 1 or 4), whose Tobin\u27s q and market/ book ratios declined only slightly and increased in some specifications, compared to matching non-cross-listed companies. Thus, the premium associated with trading in the United States was roughly constant, while the premium associated with being subject to U.S. regulation declined. The biggest losers were companies that were more profitable, riskier, and smaller, companies with a higher level of pre-SOX disclosure, and companies from well-governed countries. These results are consistent with the view that investors expected SOX to have greater costs than benefits for cross-listed firms on average, especially for smaller firms and already well-governed firms

Blog As a Bugged Water Cooler

Legal academics like to think that everything they write is scholarly. There is no surer way to offend a colleague than to suggest that some of his public musings are—gasp!—not scholarship. These comments do not seek to debate whether someone’s remarks on the Enron trial, or “gotcha” comments on the quality of the New York Times reporting, or critique of a recent Michelle Malkin book, or teaching notes thinly disguised as encyclopedic entries qualify as “scholarship.” For the purpose of these remarks, “scholarship” is anything that satisfies your budget committee. A safer (and more productive) inquiry is what we mean when we say that blogs are “transforming” something. If we define “transforming” very broadly (“Does blogging have some—however infinitesimal, speculative, indirect, removed in time—impact on legal scholarship?”), the answer is surely yes. But trivial and speculative impacts are not good excuses for a conference. The interesting question is whether blogging has a meaningful (or, as an empirical type might put it, a substantively and statistically significant) impact on legal scholarship. The answer should start with “as compared to what?” To keep a sense of proportion, this paper examines the things that have had real impact on legal scholarship in recent years

Venture Capital Limited Partnership Agreements: Understanding Compensation Arrangements

This Article uses a hand-collected dataset of venture capital partnership agreements to study venture capitalist (VC) compensation. Several new findings emerge. First, VC compensation consists of three elements, not two (management fee and carried interest), as commonly believed. The third element is the value-of-distribution rules that specify when during the fund\u27s life VCs receive distributions. These rules often generate an interest-free loan to VCs from limited partners. A shift from the most popular distribution rule to the second-most popular rule can affect VC compensation as much as or more than common variations in management fee (from 2 percent to 2.5 percent of committed capital) or carried interest (from 20 percent to 25 percent of fund profit). Second, VC compensation is often more complex and manipulable than it could have been. However, more complex management-fee provisions predict lower total compensation; thus, complexity is not used to camouflage high pay. Third, common proxies for VC quality predict higher levels of the more transparent forms of VC compensation (carried interest and management fee) but do not predict the levels of opaque compensation (interest-free loan, as determined by distribution rules). Fourth, long-term VC performance predicts fund size (which in turn predicts VC pay, controlling for fund size), but recent performance does not predict changes in fund size. Finally, VC compensation is less performance-based than commonly believed: for vintage years between 1986 and 1997 (most recent years for fully liquidated funds), about half of total VC compensation comes from the nonrisky management fee. On average, a 1 percent increase in fund returns predicts a 0.47 percent increase in total VC compensation; this pay-performance elasticity is similar to that of public company CEOs during the same years

Sarbanes-Oxley and the Cross-Listing Premium

This article tests whether the Sarbanes-Oxley Act ( SOX ) affected the premium that investors are willing to pay for shares of foreign companies cross-listed in the United States. I find that from year-end 2001 (pre-SOX) to year-end 2002 (after SOX adoption), the Tobin\u27s q and market/book ratios of foreign companies subject to SOX (cross-listed on levels 2 or 3) declined significantly, relative to Tobin\u27s q and market/book ratios of both (i) matching non-cross-listed foreign companies from the same country, the same industry, and of similar size, and (ii) cross-listed companies from the same country that are not subject to SOX (listed on levels 1 or 4), whose Tobin\u27s q and market/ book ratios declined only slightly and increased in some specifications, compared to matching non-cross-listed companies. Thus, the premium associated with trading in the United States was roughly constant, while the premium associated with being subject to U.S. regulation declined. The biggest losers were companies that were more profitable, riskier, and smaller, companies with a higher level of pre-SOX disclosure, and companies from well-governed countries. These results are consistent with the view that investors expected SOX to have greater costs than benefits for cross-listed firms on average, especially for smaller firms and already well-governed firms

The Impact of Litigation on Venture Capitalist Reputation

Venture capital contracts give VCs enormous power over entrepreneurs and early equity investors of portfolio companies. A large literature examines how these contractual terms protect VCs against misbehavior by entrepreneurs. But what constrains misbehavior by VCs? We provide the first systematic analysis of legal and non-legal mechanisms that penalize VC misbehavior, even when such misbehavior is formally permitted by contract. We hand-collect a sample of over 177 lawsuits involving venture capitalists. The three most common types of VC-related litigation are: 1) lawsuits filed by entrepreneurs, which most often allege freezeout and transfer of control away from founders; 2) lawsuits filed by early equity investors in startup companies; and 3) lawsuits filed by VCs. Our empirical analysis of the lawsuit data proceeds in two steps. We first estimate an empirical model of the propensity of VCs to get involved in litigation as a function of VC characteristics. We match each venture firm that was involved in litigation to otherwise similar venture firm that was not involved in litigation and find that less reputable VCs are more likely to participate in litigation, as are VCs focusing on early-stage investments, and VCs with larger deal flow. Second, we analyze the relationship between different types of lawsuits and VC fundraising and deal flow. Although plaintiffs lose most VC-related lawsuits, litigation does not go unnoticed: in subsequent years, the involved VCs raise significantly less capital than their peers and invest in fewer deals. The biggest losers are VCs who were defendants in a lawsuit, and especially VCs who were alleged to have expropriated founders.

SoDaH: the SOils DAta Harmonization database, an open-source synthesis of soil data from research networks, version 1.0

Data collected from research networks present opportunities to test theories and develop models about factors responsible for the long-term persistence and vulnerability of soil organic matter (SOM). Synthesizing datasets collected by different research networks presents opportunities to expand the ecological gradients and scientific breadth of information available for inquiry. Synthesizing these data is challenging, especially considering the legacy of soil data that have already been collected and an expansion of new network science initiatives. To facilitate this effort, here we present the SOils DAta Harmonization database (SoDaH; https://lter.github.io/som-website, last access: 22 December 2020), a flexible database designed to harmonize diverse SOM datasets from multiple research networks. SoDaH is built on several network science efforts in the United States, but the tools built for SoDaH aim to provide an open-access resource to facilitate synthesis of soil carbon data. Moreover, SoDaH allows for individual locations to contribute results from experimental manipulations, repeated measurements from long-term studies, and local- to regional-scale gradients across ecosystems or landscapes. Finally, we also provide data visualization and analysis tools that can be used to query and analyze the aggregated database. The SoDaH v1.0 dataset is archived and available at https://doi.org/10.6073/pasta/9733f6b6d2ffd12bf126dc36a763e0b4 (Wieder et al., 2020)

The potential science and engineering value of samples delivered to Earth by Mars sample return

© The Meteoritical Society, 2019. Executive Summary: Return of samples from the surface of Mars has been a goal of the international Mars science community for many years. Affirmation by NASA and ESA of the importance of Mars exploration led the agencies to establish the international MSR Objectives and Samples Team (iMOST). The purpose of the team is to re-evaluate and update the sample-related science and engineering objectives of a Mars Sample Return (MSR) campaign. The iMOST team has also undertaken to define the measurements and the types of samples that can best address the objectives. Seven objectives have been defined for MSR, traceable through two decades of previously published international priorities. The first two objectives are further divided into sub-objectives. Within the main part of the report, the importance to science and/or engineering of each objective is described, critical measurements that would address the objectives are specified, and the kinds of samples that would be most likely to carry key information are identified. These seven objectives provide a framework for demonstrating how the first set of returned Martian samples would impact future Martian science and exploration. They also have implications for how analogous investigations might be conducted for samples returned by future missions from other solar system bodies, especially those that may harbor biologically relevant or sensitive material, such as Ocean Worlds (Europa, Enceladus, Titan) and others. Summary of Objectives and Sub-Objectives for MSR Identified by iMOST: Objective 1 Interpret the primary geologic processes and history that formed the Martian geologic record, with an emphasis on the role of water. Intent To investigate the geologic environment(s) represented at the Mars 2020 landing site, provide definitive geologic context for collected samples, and detail any characteristics that might relate to past biologic processesThis objective is divided into five sub-objectives that would apply at different landing sites. 1.1 Characterize the essential stratigraphic, sedimentologic, and facies variations of a sequence of Martian sedimentary rocks. Intent To understand the preserved Martian sedimentary record. Samples A suite of sedimentary rocks that span the range of variation. Importance Basic inputs into the history of water, climate change, and the possibility of life 1.2 Understand an ancient Martian hydrothermal system through study of its mineralization products and morphological expression. Intent To evaluate at least one potentially life-bearing “habitable” environment Samples A suite of rocks formed and/or altered by hydrothermal fluids. Importance Identification of a potentially habitable geochemical environment with high preservation potential. 1.3 Understand the rocks and minerals representative of a deep subsurface groundwater environment. Intent To evaluate definitively the role of water in the subsurface. Samples Suites of rocks/veins representing water/rock interaction in the subsurface. Importance May constitute the longest-lived habitable environments and a key to the hydrologic cycle. 1.4 Understand water/rock/atmosphere interactions at the Martian surface and how they have changed with time. Intent To constrain time-variable factors necessary to preserve records of microbial life. Samples Regolith, paleosols, and evaporites. Importance Subaerial near-surface processes could support and preserve microbial life. 1.5 Determine the petrogenesis of Martian igneous rocks in time and space. Intent To provide definitive characterization of igneous rocks on Mars. Samples Diverse suites of ancient igneous rocks. Importance Thermochemical record of the planet and nature of the interior. Objective 2 Assess and interpret the potential biological history of Mars, including assaying returned samples for the evidence of life. Intent To investigate the nature and extent of Martian habitability, the conditions and processes that supported or challenged life, how different environments might have influenced the preservation of biosignatures and created nonbiological “mimics,” and to look for biosignatures of past or present life.This objective has three sub-objectives: 2.1 Assess and characterize carbon, including possible organic and pre-biotic chemistry. Samples All samples collected as part of Objective 1. Importance Any biologic molecular scaffolding on Mars would likely be carbon-based. 2.2 Assay for the presence of biosignatures of past life at sites that hosted habitable environments and could have preserved any biosignatures. Samples All samples collected as part of Objective 1. Importance Provides the means of discovering ancient life. 2.3 Assess the possibility that any life forms detected are alive, or were recently alive. Samples All samples collected as part of Objective 1. Importance Planetary protection, and arguably the most important scientific discovery possible. Objective 3 Quantitatively determine the evolutionary timeline of Mars. Intent To provide a radioisotope-based time scale for major events, including magmatic, tectonic, fluvial, and impact events, and the formation of major sedimentary deposits and geomorphological features. Samples Ancient igneous rocks that bound critical stratigraphic intervals or correlate with crater-dated surfaces. Importance Quantification of Martian geologic history. Objective 4 Constrain the inventory of Martian volatiles as a function of geologic time and determine the ways in which these volatiles have interacted with Mars as a geologic system. Intent To recognize and quantify the major roles that volatiles (in the atmosphere and in the hydrosphere) play in Martian geologic and possibly biologic evolution. Samples Current atmospheric gas, ancient atmospheric gas trapped in older rocks, and minerals that equilibrated with the ancient atmosphere. Importance Key to understanding climate and environmental evolution. Objective 5 Reconstruct the processes that have affected the origin and modification of the interior, including the crust, mantle, core and the evolution of the Martian dynamo. Intent To quantify processes that have shaped the planet's crust and underlying structure, including planetary differentiation, core segregation and state of the magnetic dynamo, and cratering. Samples Igneous, potentially magnetized rocks (both igneous and sedimentary) and impact-generated samples. Importance Elucidate fundamental processes for comparative planetology. Objective 6 Understand and quantify the potential Martian environmental hazards to future human exploration and the terrestrial biosphere. Intent To define and mitigate an array of health risks related to the Martian environment associated with the potential future human exploration of Mars. Samples Fine-grained dust and regolith samples. Importance Key input to planetary protection planning and astronaut health. Objective 7 Evaluate the type and distribution of in-situ resources to support potential future Mars exploration. Intent To quantify the potential for obtaining Martian resources, including use of Martian materials as a source of water for human consumption, fuel production, building fabrication, and agriculture. Samples Regolith. Importance Production of simulants that will facilitate long-term human presence on Mars. Summary of iMOST Findings: Several specific findings were identified during the iMOST study. While they are not explicit recommendations, we suggest that they should serve as guidelines for future decision making regarding planning of potential future MSR missions. The samples to be collected by the Mars 2020 (M-2020) rover will be of sufficient size and quality to address and solve a wide variety of scientific questions. Samples, by definition, are a statistical representation of a larger entity. Our ability to interpret the source geologic units and processes by studying sample sub sets is highly dependent on the quality of the sample context. In the case of the M-2020 samples, the context is expected to be excellent, and at multiple scales. (A) Regional and planetary context will be established by the on-going work of the multi-agency fleet of Mars orbiters. (B) Local context will be established at field area- to outcrop- to hand sample- to hand lens scale using the instruments carried by M-2020. A significant fraction of the value of the MSR sample collection would come from its organization into sample suites, which are small groupings of samples designed to represent key aspects of geologic or geochemical variation. If the Mars 2020 rover acquires a scientifically well-chosen set of samples, with sufficient geological diversity, and if those samples were returned to Earth, then major progress can be expected on all seven of the objectives proposed in this study, regardless of the final choice of landing site. The specifics of which parts of Objective 1 could be achieved would be different at each of the final three candidate landing sites, but some combination of critically important progress could be made at any of them. An aspect of the search for evidence of life is that we do not know in advance how evidence for Martian life would be preserved in the geologic record. In order for the returned samples to be most useful for both understanding geologic processes (Objective 1) and the search for life (Objective 2), the sample collection should contain BOTH typical and unusual samples from the rock units explored. This consideration should be incorporated into sample selection and the design of the suites. The retrieval missions of a MSR campaign should (1) minimize stray magnetic fields to which the samples would be exposed and carry a magnetic witness plate to record exposure, (2) collect and return atmospheric gas sample(s), and (3) collect additional dust and/or regolith sample mass if possible