Eric Helland

The Enforcement of Pollution Control Laws: Inspections, Violations, and Self-Reporting

Targeting is the practice of inspecting firms most likely to violate a regulation. This paper provides empirical evidence on the role of targeting in regulatory compliance. I propose that self-reporting by a firm is used to demonstrate that firms are willing to cooperate. The results indicate that there is a one-quarter penalty period following a violation. Inspections are also determined by the economic situation of the surrounding community, demonstrating that targeting opens the door to interest-group influence. Inspections that detect violations encourage self-reporting, showing that firms demonstrate their desire to cooperate with regulators by disclosing violations.

Court Politics: The Political Economy of Tort Awards

We investigate the forces that explain why trial awards differ across the United States. In 23 states judges are elected and in 10 they are elected via partisan elections. Elections have two important effects. First, defendants are often out‐of‐state nonvoters while plaintiffs are typically in‐state voters. We predict, therefore, that elected judges will redistribute wealth from out‐of‐state businesses to in‐state plaintiffs. Second, the realities of campaign financing require judges to seek and accept campaign funding from trial lawyers, who uniformly are interested in larger awards. We hypothesize that these two forces cause awards to be larger in states where the judiciary is elected rather than appointed. We also hypothesize that the demand for redistribution will increase as poverty increases and, thus, that awards will be larger in states with greater poverty. Using a sample of over 7,000 cases across 48 of the 50 states, we find significant evidence in support of these hypotheses.

Reputational Penalties and the Merits of Class‐Action Securities Litigation*

If private securities class actions alleging fraudulent behavior by officers or directors of a company are meritorious, directors and officers should pay a reputational penalty when they sit on a board of a company whose officers and directors are accused of fraud. I find little evidence of a negative effect associated with allegations of fraud. Using various definitions of board positions as a proxy for the reputation of directors who are accused of fraud, I find that the net number of board positions is consistently increased. Only in shareholder class actions in the top quartile of settlements or in which the Securities and Exchange Commission has initiated a case do directors appear to suffer a reputational penalty when a board they serve on is accused of fraud. The results call into question the merits of private securities class actions.

Who's Monitoring the Monitor? Do Outside Directors Protect Shareholders' Interests?

The corporate governance literature is rich with empirical tests of the relation between board composition and firm performance. We consider the effect of board composition on a different measure of performance, the probability a firm will be sued by shareholders. We find firms that are defendants in securities litigation have higher proportions of insiders and of gray directors and have smaller boards than a matched group of firms that are not sued, even when controlling for firm value and industry. The results suggest that boards with higher proportions of outside directors do a better job of monitoring management.

Regulation and the Evolution of Corporate Boards: Monitoring, Advising, or Window Dressing?

Abstract It is generally agreed that boards are endogenously determined institutions that serve both oversight and advisory roles in a firm. While the oversight role of boards has been extensively studied, relatively few studies have examined the advisory role of corporate boards. We examine the participation of political directors on the boards of natural gas companies between 1930 and 1998. We focus on the expansion of federal regulation of the natural gas industry in 1938 and 1954 and subsequent partial deregulation in 1986. Using data sets covering the periods from 1930 to 1990 and 1978 to 1998, we test whether regulation and deregulation altered the composition of companies’ boards as the firms’ environment changed. In particular, did regulation cause an increase and deregulation a decrease in the number of political directors on corporate boards? We find evidence that the number of political directors increases as firms shift from market to political competition. Specifically, the regulation of natu...

The Impact of Liability on the Physician Labor Market

This study examines the impact of malpractice reforms on physician behavior using a new measure of liability risk and a nationally representative, individual‐level data set on physician behavior. We match our liability measure to data on physician behavior from the Physician Practice Costs and Income Survey (PPCIS). Data from the PPCIS bracket a period of substantial state‐level legal reform between 1983 and 1988, which provides identifying variation in our liability measure. We estimate the impact of liability reform on hours worked. We find an estimated elasticity of hours worked to liability exposure of −.285 for the full sample of physicians. The effect for physicians ages 55 or older is much larger: we find an elasticity of −1.224 for this category. We find that an increase in

Using Placebo Laws to Test "More Guns, Less Crime"

1 of expected liability is associated with a

THE FUGITIVE: EVIDENCE ON PUBLIC VERSUS PRIVATE LAW ENFORCEMENT FROM BAIL JUMPING

.70–

Do Research Joint Ventures Serve a Collusive Function

1.05 increase in malpractice premiums.

Valid Inference in Single-Firm, Single-Event Studies

Abstract We reexamine Mustard and Lott’s controversial study on the effect of “shall-issue” gun laws on crime using an empirical standard error function randomly generated from “placebo” laws. We find that the effect of shall-issue laws on crime is much less well-estimated than the Mustard and Lott (1997) and Lott (2000) results suggest. We also find, however, that the cross equation restrictions implied by the Lott-Mustard theory are supported. A boomlet has occurred in recent years in the use of quasi-natural experiments to answer important questions of public policy. The intuitive power of this approach, however, has sometimes diverted attention from the statistical assumptions that must be made, particularly regarding standard errors. Failing to take into account serial correlation and grouped data can dramatically reduce standard errors suggesting greater certainty in effects than is actually the case. We find that the placebo law technique (Bertrand, Duflo and Mullainathan 2002) is a useful addition to the econometrician’s toolkit.