Publications

Working Paper
Holger Spamann. Working Paper. “On Inference When Using State Corporate Laws for Identification”. SSRNAbstract
A popular research design identifies the effects of corporate governance by (changes in) state laws, clustering standard errors by state of incorporation. Using Monte-Carlo simulations, this paper shows that conventional statistical tests based on these standard errors dramatically overreject: in a typical design, randomly generated "placebo laws" are "significant'" at the 1/5/10% level 9/21/30% of the time. This poor coverage is due to the extremely unequal cluster sizes, especially Delaware's concentration of half of all incorporations. Fixes recommended in the literature fail, including degrees-of-freedom corrections and the cluster wild bootstrap. The paper proposes a permutation test for valid inference.
Daniel M. Klerman and Holger Spamann. Working Paper. “Law Matters – Less Than We Thought”. SSRNAbstract
In a pre-registered 2×2×2 factorial between-subject randomized lab experiment with 61 federal judges, we test if the law influences judicial decisions, if it does so more under a rule than under a standard, and how its influence compares to that of legally irrelevant sympathies. The judges were given realistic materials and a relatively long period of time (50 minutes) to decide a run-of-the-mill auto accident case. We find weak evidence for the law effect, stronger evidence that rules constrain more than standards, and no evidence of a sympathy effect. Unexpectedly, we find that judges were more likely to choose the law that fully compensates an injured plaintiff.
Forthcoming
Corinna Coupette, Jyotsna Singh, and Holger Spamann. Forthcoming. “Simplify Your Law: Using Information Theory to Deduplicate Legal Documents.” ICDMW. arXivAbstract
Textual redundancy is one of the main challenges to ensuring that legal texts remain comprehensible and maintainable. Drawing inspiration from the refactoring literature in software engineering, which has developed methods to expose and eliminate duplicated code, we introduce the duplicated phrase detection problem for legal texts and propose the Dupex algorithm to solve it. Leveraging the Minimum Description Length principle from information theory, Dupex identifies a set of duplicated phrases, called patterns, that together best compress a given input text. Through an extensive set of experiments on the Titles of the United States Code, we confirm that our algorithm works well in practice: Dupex will help you simplify your law.
Holger Spamann. Forthcoming. “Indirect Investor Protection: The Investment Ecosystem and Its Legal Underpinnings.” Journal of Legal Analysis, 14. SSRNAbstract
This paper argues that the key mechanisms protecting retail investors’ financial stake in their portfolio investments are indirect. They do not rely on actions by the investors or by any private actor directly charged with looking after investors’ interests. Rather, they are provided by the ecosystem that investors (are legally forced to) inhabit, as a byproduct of the mostly self-interested, mutually and legally constrained behavior of third parties without a mandate to help the investors (e.g., speculators, activists). This elucidates key rules, resolves the mandatory vs. enabling tension in corporate/securities law, and exposes passive investing’s fragile reliance on others’ trading.
Holger Spamann. Forthcoming. “No, Judges Are Not Influenced by Outdoor Temperature: Comment.” American Economic Journal: Applied Economics. SSRNAbstract
Heyes and Saberian (AEJ-AE 2019) estimate from 2000-2004 data that outdoor temperature reduces U.S. immigration judges' propensity to grant asylum. This estimate is the result of coding and data errors and of sample selection. Correcting the errors reduces the point estimate by two thirds, with a wide 95% confidence interval straddling zero. Enlarging the sample to 1990-2019 flips the point estimate's sign and rules out the effect size reported in Heyes and Saberian with very high confidence. An analysis of all criminal sentencing decisions by U.S. federal district judges 1992-2003 yields no evidence of temperature or other weather effects either.
2021
Lars Klöhn, John Zhuang Liu, and Holger Spamann. 3/2021. “Precedent and Chinese Judges: An Experiment.” American Journal of Comparative Law, 69, 1, Pp. 93-135. Publisher's VersionAbstract
We experimentally study the decision-making process of judges in China, where judges are specifically prohibited to cite prior decisions as the basis for their judgments, and where, in past surveys, most judges explicitly stated that precedent played at most a marginal role in their decisions. In an experiment resembling real-world judicial decision making, we find, however, that precedent seems to have a significant influence on the decisions of the participating Chinese judges. Indeed, judges spend more time reading prior cases than statutes, and they typically read precedents before they access the statutes. On the other hand, judges rarely mention the precedent in their reasons. Our findings suggest that the Chinese judiciary operates much more similarly to its homologues in the U.S. and elsewhere than their written opinions and much folklore would suggest.
Holger Spamann, Lars Klöhn, Christophe Jamin, Vikramaditya Khanna, John Zhuang Liu, Pavan Mamidi, Alexander Morell, and Ivan Reidel. 2021. “Judges in the Lab: No Precedent Effects, No Common/Civil Law Differences.” Journal of Legal Analysis, 13, 1, Pp. 110-126. Publisher's VersionAbstract

In our lab, 299 real judges from seven major jurisdictions (Argentina, Brazil, China, France, Germany, India, USA) spend up to 55 minutes to judge an international criminal appeals case and determine the appropriate prison sentence. The lab computer (1) logs their use of the documents (briefs, statement of facts, trial judgment, statute, precedent), and (2) randomly assigns each judge (i) a horizontal precedent disfavoring, favoring, or strongly favoring defendant, (ii) a sympathetic or an unsympathetic defendant, and (iii) a short, medium, or long sentence anchor.  Document use and written reasons differ between countries but not between common and civil law. Precedent effect is barely detectable and estimated to be less, and bounded to be not much greater, than that of legally irrelevant defendant attributes and sentence anchors.

(Previously circulated under the title "Are there Common/Civil Law Differences and Precedent Effects in Judging Around the World? A Lab Experiment")

2020
Jesse Fried and Holger Spamann. 8/2020. “Cheap-Stock Tunneling Around Preemptive Rights.” Journal of Financial Economics, 137, 2, Pp. 353-370. Publisher's VersionAbstract
Preemptive rights are thought to protect minority shareholders from cheap-stock tunneling by a controlling shareholder. We show that preemptive rights, while making cheap-stock tunneling more difficult, cannot prevent it when asymmetric information about the value of the offered shares makes it impossible for the minority to know whether these shares are cheap or overpriced. Our analysis can help explain why sophisticated investors in unlisted firms and regulators of listed firms do not rely entirely on preemptive rights to address cheap-stock tunneling, supplementing them with other restrictions on equity issues.
Holger Spamann. 6/2020. “Lawyers’ Role-Induced Bias Arises Fast and Persists Despite Intervention.” Journal of Legal Studies, 49, 2, Pp. 467-485. Publisher's VersionAbstract
Law students randomly assigned to represent one side in a legal argument in the classroom exhibit substantial role-induced prediction bias for their side within only 40 minutes of their role assignment. Reminding students that prediction requires a more neutral perspective than advocacy does not attenuate the bias. The bias occurs evenly in male and female participants, who also report equal confidence in their predictions.
2019
Natalie Salmanowitz and Holger Spamann. 2019. “Does the Supreme Court Really Not Apply Chevron When It Should?” International Review of Law and Economics, 57, Pp. 81-89. SSRNAbstract
William Eskridge and Lauren Baer’s (96 Geo. L. J. 1083 (2008)) “empirical study of all 1014 Supreme Court cases between Chevron and Hamdan in which an agency interpretation of a statute was at issue” finds that “the Court does not apply the Chevron framework in nearly three-quarters of the cases where it would appear applicable.” Our reexamination of this study finds that the fraction of such cases is far lower, and indeed closer to zero. Our main methodological innovation is to infer Chevron applicability from Supreme Court litigants’ briefs rather than our own evaluation of the cases’ facts, as in Eskridge and Baer’s study. In over half the cases flagged by Eskridge and Baer, neither of the parties (nor, where applicable, the Solicitor General as amicus) cited Chevron, and in almost half of the cases within that subset, no one argued for or against deference of any kind. In most of a sample of the remaining cases, the Supreme Court either did not need to reach the Chevron issue, or actually applied it, at least in an abbreviated form.
codebook brief_coding_data
2018
Holger Spamann. 2018. “Are Sleepy Punishers Really Harsh Punishers? Comment on Cho, Barnes, and Guanara (2017).” Psychological Science, 29, 6, Pp. 1006-1009. Publisher's VersionAbstract
This comment points out four severe reservations regarding Cho et al.’s (PS 2017) finding that U.S. federal judges punish more harshly on “sleepy Mondays,” the Mondays after the start of Daylights Savings Time. First, Cho et al.’s finding pertains to only one of at least two dimensions of harshness, and the opposite result obtains in the second dimension. Second, even within the first dimension, Cho et al.’s result is statistically significant only because of a variable transformation and sample restrictions that are neither transparent in the article nor theoretically sound. Third, reanalysis of the data with superior methods reveals no significant “sleepy Monday” effect in the years 1992-2003. Fourth, sentences were on average shorter on “sleepy Mondays” out of sample, namely in 2004-2016.
2016
Holger Spamann. 2016. “Can Simple Mechanism Design Results be Used to Implement the Proportionality Standard in Discovery?: Comment.” Journal of Institutional and Theoretical Economics, 172, Pp. 227-231. SSRN versionAbstract
In this comment on Gelbach (JITE 2016), I make two points. First, I support Gelbach’s application of mechanism design (MD) to legal design because it takes information requirements and other constraints seriously. MD derives the best rule under the stated constraints. This rigorously confirms the existing rule’s optimality, reveals a superior alternative, or, if the MD solution appears unrealistic, uncovers additional constraints that any real solution must satisfy. Second, I consider implementing the social optimum, rather than the private optimum. In Gelbach’s discovery example, even a court with limited information can objectively implement some social goals; for other social goals, the court can at least do the best it can according to its subjective beliefs.
Holger Spamann and Lars Klöhn. 2016. “Justice is Less Blind, and Less Legalistic, Than We Thought: Evidence from an Experiment with Real Judges.” Journal of Legal Studies, 45, Pp. 255-80. Publisher's VersionAbstract
We experimentally investigate the determinants of judicial decisions in a setting resembling real-world judicial decision-making. U.S. federal judges (N=32) spend 55 minutes judging a real appeals case from an international tribunal, with minor modifications to accommodate the experimental treatments. The fictitious briefs focus on one easily understandable issue of law. Our 2×2 between-subject factorial design crosses a weak precedent and legally irrelevant defendant characteristics. In a survey, law professors predicted that the precedent would have a stronger effect than the defendant characteristics. In actuality, the precedent has no detectable effect on the judges’ decisions, whereas the two defendants’ affirmance rates differ by 45% (p<.01). Judges’ written reasons, on the other hand, do not mention defendant characteristics at all, focusing instead on the precedent and other legalistic and policy considerations.
Replication files Appendix
Holger Spamann. 2016. “Monetary Liability for Breach of the Duty of Care?” Journal of Legal Analysis, 8, Pp. 337-373. Publisher's VersionAbstract

This article clarifies why optimal corporate governance generally excludes monetary liability for breach of directors’ and managers’ fiduciary duty of care. In principle, payments predicated on third-party investigations of directors’ and managers’ business decisions could usefully supplement payments predicated on stock prices or accounting figures in the provision of performance incentives, including risk-taking incentives. Consequently, the reason not to use liability incentives is not absolute but a cost-benefit trade-off: Litigation is expensive, while the benefits from refining incentives are limited. The analysis rationalizes many existing exceptions from non-liability but also leads to novel recommendations, particularly for entities other than public corporations.

Holger Spamann. 2016. “The US Crime Puzzle: A Comparative Perspective on US Crime & Punishment.” American Law and Economics Review, 18, 1, Pp. 33-87. Publisher's VersionAbstract
This paper compares actual U.S. crime and incarceration rates to predicted rates from cross-country regressions. Global cross-country regressions of crime and incarceration on background characteristics explain much of the variation between other countries. But the estimated models predict only one-fourth of U.S. incarceration and not all of U.S. crime. The coincidence of the non-negative U.S. crime residuals with the very large positive U.S. incarceration residual constitutes a puzzle. The two pieces fit together only if the residual U.S. incarceration does not contribute to a reduction in crime, except to the extent an omitted criminogenic factor pushes up U.S. crime. The paper quantifies this relationship. Drawing on additional evidence from comparative and U.S.-specific data, it argues that the puzzle's most plausible solution combines low effectiveness of mass incarceration with omitted criminogenic factors such as U.S. neighborhood segregation.
Replication files Appendix
2015
Holger Spamann. 2015. “Empirical Comparative Law.” Annual Review of Law and Social Science, 11, Pp. 131-153. Publisher's VersionAbstract
I review the empirical comparative law literature with an emphasis on quantitative work. After situating the field and surveying its main applications to date, I turn to methodological issues. I discuss at length the obstacles to causal inference from comparative data, and caution against inappropriate use of instrumental variables and other techniques. Even if comparative data cannot identify any single causal theory, however, they are extremely important in narrowing down the set of plausible theories. I report progress in measurement design and suggest improvements in data analysis and interpretation using techniques from other fields, particularly growth econometrics.
James Naughton and Holger Spamann. 2015. “Fixing Public Sector Finances: The Accounting and Reporting Lever.” UCLA Law Review, 62, Pp. 572-620. SSRNAbstract
The finances of many states, cities, and other localities are in dire straits. In this Article, we argue that partial responsibility for this situation lies with the outdated and ineffective financial reporting regime for public entities. Ineffective reporting has obscured and continues to obscure the extent of municipal financial problems, thus delaying or even preventing corrective actions. Worse, ineffective reporting has created incentives for accounting gimmicks that have directly contributed to the dramatic decline of public sector finances. Fixing the reporting regime is thus a necessary first step toward fiscal recovery. We provide concrete examples of advisable changes in accounting rules and advocate for institutional changes, particularly Securities and Exchange Commission involvement, that we hope will lead to better public accounting rules generally.
2014
Holger Spamann. 10/15/2014. “Derivatives Trading and Negative Voting”. SSRNAbstract
This paper exposits a model of parallel trading of corporate securities (shares, bonds) and derivatives (TRS, CDS) in which a large trader can sometimes profitably acquire securities with their corporate control rights for the sole purpose of reducing the corporation's value and gaining on a net short position created through off-setting derivatives. At other times, the large trader profitably takes a net long position. The large trader requires no private information beyond its own trades. The problem is most likely to manifest when derivatives trade on an exchange and transactions give blocking powers to small minorities, particularly out-of-bankruptcy restructurings and freezeouts.
2011
Dan Klerman, Paul Mahoney, Holger Spamann, and Mark Weinstein. 2011. “Legal Origins or Colonial History?” Journal of Legal Analysis, 3, 2, Pp. 379-409. Publisher's VersionAbstract
Economists have documented pervasive correlations between legal origins, modern regulation, and economic outcomes around the world. Where legal origin is exogenous, however, it is almost perfectly correlated with another set of potentially relevant background variables: the colonial policies of the European powers that spread the “origin” legal systems through the world. We attempt to disentangle these factors by exploiting the imperfect overlap of colonizer and legal origin, and looking at possible channels, such as the structure of the legal system, through which these factors might influence contemporary economic outcomes. We find strong evidence in favor of non-legal colonial explanations for economic growth. For other dependent variables, the results are mixed.
Replication files
2010
Lucian Bebchuk and Holger Spamann. 2010. “Regulating Bankers' Pay.” Georgetown Law Journal, 98, Pp. 247-287. SSRNAbstract

This paper seeks to make three contributions to understanding how banks’ executive pay has produced incentives for excessive risk-taking and how such pay should be reformed. First, although there is now wide recognition that pay packages focused excessively on short-term results, we analyze a separate and critical distortion that has received little attention. Equity-based awards, coupled with the capital structure of banks, tie executives’ compensation to a highly levered bet on the value of banks’ assets. Because bank executives expect to share in any gains that might flow to common shareholders, but are insulated from losses that the realization of risks could impose on preferred shareholders, bondholders, depositors, and taxpayers, executives have incentives to give insufficient weight to the downside of risky strategies. 

Second, we show that corporate governance reforms aimed at aligning the design of executive pay arrangements with the interests of banks’ common shareholders - such as advisory shareholder votes on compensation arrangements, use of restricted stock awards, and increased director oversight and independence -cannot eliminate the identified problem. In fact, the interests of common shareholders could be served by more risk-taking than is socially desirable. Accordingly, while such measures could eliminate risk-taking that is excessive even from shareholders’ point of view, they cannot be expected to prevent risk-taking that serves shareholders but is socially excessive. 

Third, we develop a case for using regulation of banks’ executive pay as an important element of financial regulation. We provide a normative foundation for such pay regulation, analyze how regulators should monitor and regulate bankers’ pay, and show how pay regulation can complement and reinforce the traditional forms of financial regulation.

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