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One of the most important developments underlying capital markets in recent years is the increase in the influence of activist minority shareholders. In a company without a controlling shareholder, dominant and activist shareholders, who hold only a low proportion of the company's shares, can influence and even tip the scales in the decisions made and direct the company's business. The legal system therefore imposes a fiduciary duty not only on controlling shareholders but also on those with effective control. Alongside the obligation, however, the absence of a clear and explicit definition of the concepts of effective power and effective control stands out. The Article empirically analyzes key court decisions litigated under Delaware law and finds that only two explanatory variables significantly explain court decisions in cases where the question of effective control arises. It therefore proposes a test for estimating shareholders' effective power borrowed from the field of cooperative game theory. The test is based on the Shapley Value and Shapley and Shubik's Power Index. The Article presents its application to decisions made at shareholders' meetings to estimate the effective power of activist minority shareholders in various decisions. This test is simple to operate, objectively examines the situation based on the factual system that existed at the time the decision was made, and is not limited to specific ownership structures, particular markets, or current times. Adoption of the test is expected to increase the legal certainty regarding the imposition of duties on activist minority shareholders with effective control, thereby reducing the agency costs created as a result of the gap between their formal share in the corporation and their effective power. [ABSTRACT FROM AUTHOR]

Initial coin offerings (ICOs) are a new form of fundraising whereby blockchain-related ventures raise public capital in exchange for newly issued digital tokens. In recent years, ICOs have been a prominent focus of legal and economic studies, which analyze their characteristics and determinants of their success. In this Article, we systematically review these studies and identify key ICO success factors. We then offer theoretical explanations for our findings, and in certain cases, connect the empirical results with the IPO and crowdfunding literatures. The results of our analysis are important for two reasons. First, there is no single formal data source, and there is evidence of inconsistencies across the different data sources available. Second, our results show in what circumstances ICO investors and initiators behave like IPO investors and initiators, and hence contribute to the literature on tokens as securities. In the second part of this Article, based on our analysis, we show that a high degree of information asymmetry exists in ICOs, identify three sources of informational asymmetries, and discuss the role of signaling theory and rating websites in mitigating these asymmetries. Finally, we discuss the regulatory implications of our findings, and propose specific disclosure requirements tailored to ICOs. Keywords: Initial Coin Offerings (ICO), Initial Public Offering (IPO), Cryptocurrency, Digital Tokens, Securities Regulation JEL Classification: K22, G14, G18, G23, G28, TABLE OF CONTENTS I. INTRODUCTION 527 II. AN OVERVIEW OF THE FOUNDATIONS OF BLOCKCHAIN AND ICOS 532 A. Blockchain 532 B. Smart Contracts 535 C. Cryptocurrencies, Coins, Digital Currencies, and [...]

From its early days, the sharing economy was celebrated in utopian terms as a platform for creating and sharing wealth across social divides. Sharing, it is often argued, facilitates improved wealth redistribution and a decentralized, equitable, and sustainable economy by providing a community-based economy of sharers. These idealistic sentiments prevalent in the public sphere, are what we call the sharing economy equalizing myth. But is this myth true, or is it just a smoke screen that enables aggressive participants in the sharing economy to harness its features for their own benefit? This Article "meta-analyzes" an extensive volume of hundreds of empirical findings that studied the socio-economic implications of the sharing economy. We focus on three distinct fields that are central to peoples' lives and wealth: labor, housing, and finance. We find that across a variety of markets, unequal outcomes are constantly prevalent. In fact, sharing economies impose great threats to both efficiency and fair distribution. We identify three implications of the sharing economy wherever it operates: (1) big or sophisticated stakeholders who take advantage of the regulatory system's weaknesses; (2) uncontrolled discriminatory practices, and (3) negative externalities on the non-sharing, traditional, market. We argue that these negative implications should be identified as a market failure in which the sharing economy operates. This market failure is a result of a structural regulatory arbitrage: the sharing economy incentivizes and rewards sophisticated repeat players to exploit the weaknesses of the regulatory system. To remedy this. market solutions are not enough, although we do offer several such solutions in order to confront the market failure generated by the sharing economy, we argue that a conceptual regulatory shift must be adopted. [ABSTRACT FROM AUTHOR]

Class actions feature severe agency problems, resulting from the divergence of interests between class members and the class attorney. This article proposes a novel mechanism for selecting the class attorney and aligning her interests with those of the represented class. The mechanism applies a combined percentage and hourly litigation fee structure, suggested by Polinsky, Mitchell A., and Daniel L. Rubinfeld. 2003. "Aligning the Interests of Lawyers and Clients," 5 Am Law Econ Rev 165, in which lawyers earn a percentage of the class' common fund, and bear the same percentage over their time investment. To maximize the expected payoff for the class, we supplement this fee structure with a preliminary two stages auction, in which the role of the lawyer is tendered using competitive bidding. We prove that the proposed auction approximates the highest possible net payoff for the class as the number of lawyers who compete for the right to represent the class increases. The percentage taken by the lawyer would be the lowest possible, and the winning lawyer would be the one who produces the highest expected net payoff for the class. We then extend the model to cases where the attorney files the class action is compensated for her pre-filing investment, and to settlements (JEL K41, K22) [ABSTRACT FROM AUTHOR]

Peer-to-peer ("P2P") lending, defined broadly as the use of non-bank online platforms that match borrowers with lenders, is arguably one of the most important innovations in the area of alternative finance. It changes the way lenders and borrowers interact, reconstructs the credit market by driving massive disintermediation, and reshapes our general understanding of financial systems. This Article analyzes the current state of the P2P lending market with the goal of developing policy recommendations to facilitate the safe growth of this important market segment. It starts by providing an extensive overview of the P2P lending market from four different perspectives: the financial intermediary role of the platforms, the characteristics of the market, benefits and risks faced by market participants, and its regulation in leading jurisdictions. This descriptive analysis demonstrates how the P2P lending market has changed over time and identifies recent trends, risks, and challenges that require regulatory attention. In light of this analysis, the Article then proceeds to discuss policy implications in three key areas. First, it shows that P2P lending platforms, originally designed to serve as online marketplaces that only match lenders with borrowers, have gradually evolved into new financial intermediaries that perform various brokerage activities and provide tools intended to help lenders manage their credit risks. It then argues that regulation should be modified to better suit this new financial intermediary role and discusses key considerations. Second, the Article examines the disclosure provisions faced by platforms and proposes imposing consistent disclosure standards tailored to the characteristics of different types of P2P lending platforms. It presents specific examples of such disclosure requirements and provides justifications for imposing them. Finally, the article outlines key concerns related to the increasing involvement of institutional actors in P2P lending platforms-- adverse selection among different types of lenders and growing financial stability risks--and discusses their regulatory implications. [ABSTRACT FROM AUTHOR]

I analyze the legal rules governing the sale-of-corporate-control in the case of going private transactions and examine whether a controlling shareholder must share the premium associated with sale-of-control. I rely on the framework developed in (Bebchuk, L.A. 1994. "Efficient and Inefficient Sales of Corporate Control," 109 Quarterly Journal of Economics 957–993) regarding these transactions under the adjusted market rule (AMR) enabling different rights for the controlling and minority shareholders, and under the adjusted equal opportunity rule (AEOR) providing equal rights to the minorities and controller. My main findings are that both rules prevent inefficient transfers, since under both the new controller fully internalizes the externality imposed by extracting private benefits of control. However, the AMR is superior in facilitating efficient transfers. This is because the AEOR can prevent efficient transfers, due to the higher price demanded from the buyer in order to compensate both controller and minorities. In consequence, overall, the AMR dominates the AEOR for transactions in which a company is taken private. [ABSTRACT FROM AUTHOR]

Housing is the most important asset in the portfolio of most households. Understanding the households' decision on housing finance has important implications from a policy perspective, due to the effects it may have on the housing prices, on the housing market stability and on household welfare. The theoretical literature on housing finance focused on figuring out the optimal choice between fixed rate mortgages (FRMs) and adjustable rate mortgages (ARMs). We argue that the standard economic criteria are sometimes inadequate to explain household's choices, which may be motivated by psychological factors. In other words, we claim that household's choice depends only partially on the findings of the theoretical literature. We examine the effect of changes in the short-term market interest rate on the households' choice between FRMs and ARMs. We test this effect using a unique data provided to us by the Bank of Israel, which contains detailed information on the household's decision between FRM and ARM contracts in Israel in the past decade. The results of our analysis demonstrate a significant association between FRM preference and short-term interest rate reduction. Moreover, we find that the change in the short-term interest rate is more salient to the borrowers in periods of a high interest rate environment. We attribute these findings to Tversky and Kahneman (1974) availability and representativeness heuristics. [ABSTRACT FROM AUTHOR]