Empirical Legal Studies

The Empirics of Special Litigation Committees (SLCs)

Contributing to special litigation committees' (SLCs) mixed reputation is that while SLCs are supposed to consider the merits of derivative litigation brought by shareholders against a company they are frequently composed of board members from the same company/board that is being sued. Accordingly, many corporate scholars hypothesize that SLCs are structurally inclined to dismiss the shareholders’ cases and operate solely to protect directors from liability.

In a recent paper, An Empirical Study of Special Litigation Committees: Evidence of Management Bias and the Effect of Legal Standards, C.N.V. Krishnan (Case Western--Finance), Steven D. Solomon (Berkeley), and Randall S. Thomas (Vanderbilt), drawing on sample of 384 publicly available SLC events spanning the 26-year period Jan 1, 1990 through Dec 31, 2015, "... empirically test the effectiveness and use of SLCs, the recommendations that they make in their reports, and how legal rules on the judicial review of those report affect case outcomes." The excerpted abstract summarizes the paper's key findings.

"We find evidence that SLC reports are most likely to recommend case dismissal, that such a recommendation is significantly and positively associated with the probability of the case being dismissed, and significantly and negatively associated with probability of case settlement, even after controlling for lawsuit reasons, legal standards, and time fixed effects. However, we find evidence that SLCs reports systematically underestimate the likelihood that cases will settle. We also find that SLC reports to dismiss are filed with significantly higher frequency when all defendants are current or former directors as compared to the rest of the cases, but actual dismissals occur with significantly higher frequency when any defendant is an entity other than the defendant firm as compared to all other cases, providing some evidence that SLCs tend to favor their fellow directors and officers. We also find that law matters for SLC outcomes: incorporation in Delaware and a lawsuit filed in Delaware courts are both significantly associated with a lower probability of the SLC report recommending dismissal of the case, and a motion to dismiss filed by a SLC. We find that actual case dismissals are the lowest amongst all jurisdictions in Delaware suits. In states with the lowest legal standards for SLC judicial review, SLC’s cases are more likely to be dismissed. Our findings highlight that, contrary to prior studies, there is evidence of SLC pro-management bias, and also highlight the importance of legal rules and judicial oversight of SLCs."

ELS Replication Conference--Call For Proposals--Deadline Extension

UPDATE: The PELS conference submission deadline has been extended to Sunday, October 22, 2017. The PELS conference will be held at Claremont McKenna College on Friday, April 27, 2017.

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Given the long (and growing) list of "problems," increased attention to the importance of replication is both inevitable and, indeed, much welcome. Evidence of increased attention takes an array of forms (e.g., data repositories for published articles and the publishing of research protocols prior to estimation are becoming increasingly common (and even expected)).

To promote and encourage replication studies in empirical legal studies, Claremont McKenna College’s Program on Empirical Legal Studies (PELS) is pleased to announce the inaugural Empirical Legal Studies Replication Conference to be held on Friday April 27, 2018, in Claremont, California. A call for proposals from conference coordinator, Prof. Eric Helland (Claremont--econ.), follows.

"We are currently soliciting proposals that detail a plan to replicate an important study in law and economics/empirical legal studies. Although we welcome submissions generally, we strongly encourage proposals from teams consisting of a faculty member and one or more graduate students, in recognition of the fact that replication studies are also an excellent form of pedagogy.

Proposals should be 4-5 pages in length and must include details on how the authors propose to proceed, including a plain for obtaining the data necessary for the replication (e.g., is the data publically available, or has the author of the study to be replicated provided them the data?). We would also welcome (but do not require) additional details on ways the authors might plan to extend the study (e.g., by conducting the original estimation using different time periods, different jurisdictions, or other estimation techniques). Proposed replication studies will be judged on how important the paper is to law and economics/empirical legal studies and the tractability of the proposed replication.

Authors of accepted proposals must commit to attending the conference. In general, graduate student authors will present their own papers, and their faculty co-authors will serve as discussants on another paper presented at the conference.

PELS will reimburse up to one graduate student and one faculty member for accommodations and reasonable travel costs."

Those with questions or desiring additional information should contact Eric Helland directly at: [email protected]. The new deadline for proposals is October 22, 2017.

CELS 2018

For those who like to plan ahead, CELS 2018, hosted by the University of Michigan Law School, is scheduled for November 9-10, 2018. Conference organizers include Professors James Hines, J.J. Prescott, and Sonja Starr.

C.I.s, Overalpp, and Statistical Significance--A Quick Reminder

An asymmetric relation between CIs (confidence intervals) and statistical significance constantly trips up students (and others). A quick-and-dirty summary follows (a fuller discussion, with helpful examples, is found on the Stata Blog here).

In short: if the individual CIs do not overlap, then the difference is statistically significant. However, the reverse is not necessarily true. That is, CIs for individual parameters can overlap even if their difference is statistically significant. What is also true is that if the difference is statistically significant, the CI for the difference will exclude zero.

State of Empirical Legal Scholarship: Environmental Law

As empirical legal scholarship continues to develop and expand, progress varies across the traditional scholarly silos. (Why this is so likely warrants its own careful study.) In an effort to periodically update readers on developments in particular subject areas, Robert Fischman (Indiana) and Lydia Barbash-Riley's (Indp.) paper, Empirical Environmental Law Scholarship, warrants attention as it provides a helpful perspective on empirical developments in environmental law. The paper's abstract, below, summarizes.

“The most important development in legal scholarship over the past quarter century has been the rise of empirical research. Drawing upon the traditions of legal realism and the law and economics movement, a variety of social science techniques have delivered fresh perspectives and punctured false claims. But environmental law has been slow to adopt empirical tools, and our findings indicate that it lags behind other fields. There are several clear benefits from an empirical agenda to explore how to make environmental law more effective. But no previous article has applied the lessons from empirical scholarship in other fields to environmental law. This Article fills that gap by assessing the state of environmental empirical scholarship, evaluating the strengths and weaknesses of published approaches to answering empirical questions, and recommending methods to advance the empirical research agenda.

Where environmental law scholarship has employed empiricism, it has done so mostly in the pollution control area. More empirical environmental law research relies on analysis of existing data than on the generation of new data, and experimental treatments are completely absent from our review of the literature. One strength of the empirical work in environmental law is analyzing existing data to determine correlations using regression analysis and statistics. But empirical environmental law scholarship underperforms in offering policy prescriptions. This assessment of the field identifies several methods and sources of data that may prove useful in advancing and sharpening empiricism’s contribution to law reform and implementation.”