Abstract: Paying a dividend, repurchasing shares, underpricing an initial public offering, pledging collateral, and borrowing using short-term, instead of long-term debt, are all forms of corporate communications. They are “corporate signals” that tell investors certain things about a company’s operations and current financial position, and about the managers’ confidence in its future performance. This Article provides the first comprehensive analysis of the relationship between corporate signals and securities fraud. The incentive to communicate using corporate signals has increased in recent years, a phenomenon that, I argue, is due to the growing complexity of public corporations, and, importantly, to a number of changes in federal securities laws aimed at better deterring fraud and making companies more transparent. The Article makes three major contributions. First, it identifies this deep connection between the use of corporate signals (both truthful and deceptive) and recent changes in securities laws. Second, it identifies significant social costs associated with corporate signaling, which commentators and policymakers have overlooked: signals can encourage stock bubbles, create costly “signaling races,” and lead to the loss of information about companies and industries. Third, it provides a normative account of how a lawmaker could design antifraud provisions under the securities laws in order to reduce total fraud, instead of simply rechanneling deceptive practices from the realm of written and oral statements to that of deceptive corporate signals.
2015-2016 Board of Editors
We are pleased to announce the Board of Editors for the 2015-2015 academic year.
BCLR Latest Issue: Vol. LVI No. 3
The Boston College Law Review is pleased to announce our latest publication , the May 2015 issue. The current issue is featured on […]
BCLR Releases Vol. LV No. 3
The Boston College Law Review is pleased to publish the May 2014 issue. Here are summaries of this issue’s Articles and Notes: […]