Publications

2009
Hart, Oliver, and Luigi Zingales. 2009. “To Regulate Finance, Try the Market.” Foreign Policy.
ForeignPolicy-2009
Hart, Oliver. 2009. “Regulation and Sarbanes-Oxley.” Journal of Accounting Research 47 (2): 437-445.
JofAR-2009
Hart, Oliver, Ernst Fehr, and Christian Zehnder. 2009. “Contracts, Reference Points, and Competition - Behavioral Consequences of the Fundamental Transformation.” Journal of the European Economic Association 7 (2-3): 561-572. Abstract

In this paper we study the role of incomplete ex ante contracts for ex post trade. Previous experimental evidence indicates that a contract provides a reference point for entitlements when the terms are negotiated in a competitive market. We show that this finding no longer holds when the terms are determined in a non-competitive way. Our results imply that the presence of a “fundamental transformation” (i.e., the transition from a competitive market to a bilateral relationship) is important for a contract to become a reference point. To the best of our knowledge this behavioral aspect of the fundamental transformation has not been shown before. (JEL: C91, D03, D23)

JEEA-2009
Hart, Oliver, and Luigi Zingales. 2009. “How the Tricks that Crashed Wall Street Can Save the World.” Foreign Policy. Publisher's Version
2008
Hart, Oliver. 2008. “Reference Points and the Theory of the Firm.” Economica 75 (299): 404-411.
referencepointsandthetheoryofthefirm_2.pdf
Hart, Oliver, and John Moore. 2008. “Contracts as Reference Points.” Quarterly Journal of Economics CXXIII (1): 1-48. Abstract

We argue that a contract provides a reference point for a trading relationship: more precisely, for parties’ feelings of entitlement. A party’s ex post performance depends on whether he gets what he is entitled to relative to outcomes permitted by the contract. A party who is shortchanged shades on performance. A flexible contract allows parties to adjust their outcomes to uncertainty but causes ineffi- cient shading. Our analysis provides a basis for long-term contracts in the absence of noncontractible investments and elucidates why “employment” contracts, which fix wages in advance and allow the employer to choose the task, can be optimal.

QJE-2008
Hart, Oliver, and Luigi Zingales. 2008. “Economists Have Abandoned Principle.” Wall Street Journal.
economists_have_abandoned_principle_-_wsj11.pdf
Hart, Oliver, Simeon Djankov, Caralee McLiesh, and Andrei Shleifer. 2008. “Debt Enforcement Around the World.” Journal of Political Economy 116 (6): 1105-1149. Abstract

Insolvency practitioners from 88 countries describe how debt enforce- ment will proceed against an identical hotel about to default on its debt. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern vs. piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. This measure is strongly correlated with per capita income and legal origin and predicts debt market development. Several characteristics of debt enforcement procedures, such as the structure of appeals and avail- ability of floating charge finance, influence efficiency.

JPE-2008
2007
Hart, Oliver, and John Moore. 2007. “Incomplete Contracts and Ownership: Some New Thoughts.” American Economic Review 97 (2): 182-186.
AER-2007
2005
Hart, Oliver, and J Moore. 2005. “On the Design of Hierarchies: Coordination Versus Specialization.” Journal of Political Economy 113 (4): 675-702.
jpe_2005.pdf
2001
Hart, Oliver. 2001. “Norms and the Theory of the Firm.” University of Pennsylvania Law Review.
Hart, Oliver, and Lucian Bebchuck. 2001. “Takeover Bids vs. Proxy Fights in Contests for Corporate Control”. Abstract

This paper evaluates the primary mechanisms for changing management or obtaining control in publicly traded corporations with dispersed ownership. Specifically, we analyze and compare three mechanisms: (1) proxy fights (voting only); (2) takeover bids (buying shares only); and (3) a combination of proxy fights and takeover bids in which shareholders vote on acquisition offers. We first show how proxy fights unaccompanied by an acquisition offer suffer from substantial shortcomings that limit the use of such contests in practice. We then argue that combining voting with acquisition offers is superior not only to proxy fights alone but also to takeover bids alone. Finally, we show that, when acquisition offers are in the form of cash or the acquirer’s existing securities, voting shareholders can infer from the pre-vote market trading which outcome would be best in light of all the available public information. Our analysis has implications for the ongoing debates in the US over poison pills and in Europe over the new EEC directive on takeovers.

TakeoverBids
Hart, Oliver. 2001. “Financial Contracting.” Journal of Economic Literature 34 (4): 1079-1100.
JEL-2001
1999
Hart, Oliver. 1999. “Different Approaches to Bankruptcy.” Governance, Equity and Global Markets, Proceedings of the Annual Bank Conference on Development Economics in Europe, June 21-21, 1999. Paris: La Docmentation Francaise, 2000.
hart-diffapproachbankruptcy.pdf
Hart, Oliver, and J Moore. 1999. “Foundations of Incomplete Contracts.” Review of Economic Studies 66 (1): 115-138.
Hart, Oliver. 1999. “Corporate Governance: Some Theory and Implications," The Economic Journal.” The Economic Journal 105: 678-689.
1998
Hart, Oliver, and John Moore. 1998. “Cooperatives vs. Outside Ownership”.
CooperativesVsOutside
Hart, Oliver, and J Moore. 1998. “Default and Renegotiation: A Dynamic Model of Debt.” Quarterly Journal of Economics 113 (1): 1-41.
1997
Hart, Oliver, A Shleifer, and RW Vishny. 1997. “The Proper Scope of Government: Theory and an Application to Prisons.” Quarterly Journal of Economics 112 (4): 1126-1161.

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