Allen Ferrell

Harvey Greenfield Professor of Securities Law

Griswold 303

617-495-8961

Assistant: Wendy Moore / 617-496-2865

Biography

Allen Ferrell is the Greenfield Professor of Securities Law at Harvard Law School. He is also a faculty associate at the Kennedy School of Government, chairman of the Harvard Advisory Committee on Shareholder Responsibility, and a research associate at the European Corporate Governance Institute. He was previously on the Board of Economic Advisors to the Financial Industry Regulatory Authority (FINRA), a research fellow at FINRA, and a member of the ABA Task Force on Corporate Governance. He has written widely on capital market regulation, securities litigation and corporate governance.  His representative publications include "Thirty years of shareholder rights and firm valuation" forthcoming in the Journal of Finance (with Martijn Cremers), "Forward-casting 10b-5 Damages: A Comparison to other Methods," 37 Journal of Corporation Law 365 (with Atanu Saha) and "Mandated Disclosure and Stock Returns: Evidence from the Over-the-Counter Market," 36 Journal of Legal Studies 1. He received his Ph.D in economics from MIT, his J.D. from Harvard Law School and his BA and MA from Brown University. He clerked for Judge Silberman on the United States Court of Appeals for the District of Columbia and Justice Kennedy of the Supreme Court of the United States. 

Areas of Interest

Allen Ferrell, Hao Liang & Luc Renneboog, Socially Responsible Firms, 122 J. Fin. Econ. 585 (2016).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Governance
Type: Article
Abstract
In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value. (C) 2016 Published by Elsevier B.V.
Martijn Cremers & Allen Ferrell, Thirty Years of Shareholder Rights and Firm Value, 69 J. Fin. 1167 (2014).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
Type: Article
Abstract
This paper introduces a new hand-collected data set that tracks restrictions on shareholder rights at approximately 1,000 firms from 1978 to 1989. In conjunction with the 1990 to 2006 IRRC data, we track shareholder rights over 30 years. Most governance changes occurred during the 1980s. We find a robustly negative association between restrictions on shareholder rights (using G-Index as a proxy) and Tobin's Q. The negative association only appears after judicial approval of antitakeover defenses in the 1985 landmark Delaware Supreme Court decision of Moran v. Household. This decision was an unanticipated exogenous shock that increased the importance of shareholder rights.
Allen Ferrell & Atanu Saha, Forward-Casting 10b-5 Damages: A Comparison to Other Methods, 37 J. Corp. L. 365 (2012).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
Type: Article
Abstract
We propose in this paper the forward-casting method for estimating 10b-5 damages. We argue that this method compares favorably to two commonly used 10b-5 damage methods: constant dollar back-casting and the allocation method. Most importantly, both constant dollar back-casting and the allocation method, in contrast to forward-casting, fail to incorporate market expectations in estimating the stock price that would have obtained absent the alleged fraud. In the course of our discussion, we demonstrate how each one of these three methods work in practice using facts and data from an actual case. The choice of a damage method, as we document, can make a dramatic difference in estimated damages.
Allen Ferrell & Andrew Roper, Price Impact, Materiality, and Halliburton II, 93 Wash. U. L. Rev. 93 (2015).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Securities Law & Regulation
Type: Article
Abstract
The Supreme Court decision in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014), reaffirmed the availability of the fraud-on-the-market presumption of “reliance” for purposes of a Rule 10b-5 class certification. At the same time, the Court held that defendants could rebut the presumption if they could provide “direct evidence” that the alleged misrepresentations did not in fact impact the price of the security (i.e., a lack of price impact). In this Article we discuss various issues that have arisen in lower court rulings that have addressed Halliburton price impact arguments. These issues include the relationship between materiality and price impact, the distinction between hypothetical versus actual changes in the total mix of information made available to the market, the use of event studies, and some lower courts’ refusal to consider certain types of economic evidence in the context of price impact arguments.
Lucian A. Bebchuk & Allen Ferrell, Rethinking Basic, 69 Bus. Law. 671 (2014).
Categories:
Civil Practice & Procedure
,
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Corporate Law
,
Securities Law & Regulation
,
Class Action Litigation
Type: Article
Allen Ferrell & Atanu Saha, Calculating Damages in ERISA Litigation, 1 J. Fin. Persp. 93 (2013).
Categories:
Labor & Employment
,
Civil Practice & Procedure
,
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
,
Litigation & Settlement
,
Retirement Benefits & Social Security
Type: Article
Abstract
In this paper we will present and discuss four different methodologies for calculating ERISA damages — what we will label the “best-performing fund,” “portfolio redistribution,” “most similar fund,” and “10b-5 style” ERISA damage methods. For purposes of demonstrating how these ERISA damage methods work in practice we will use facts and data from an actual ERISA litigation matter. These different ERISA methods can result in strikingly different damage estimates. In the ERISA matter we analyze, for instance, aggregate damages can range from less than U.S.$3 million, using the “most similar fund” approach, to well over U.S.$2 billion using the “best-performing fund” ERISA damage method.
Martijn Cremers & Allen Ferrell, Thirty Years of Shareholder Rights and Stock Returns (AFA 2013 San Diego Meetings Paper, 2012).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Governance
Type: Article
Abstract
This paper explores the robustness of the positive association between shareholder rights and abnormal stock returns (using the Fama-French-Cahart four factor model) and potential explanations thereof. Utilizing hand-collected shareholder rights data for the 1978-1989 period in conjunction with the existing post-1990 RiskMetrics data, we document that: (1) over the 1978-2007, the association is generally robust to a variety of controls and estimating abnormal returns at the portfolio or firm-level; (2) this association co-varies with merger and acquisition (M&A) waves; (3) while being acquired and making acquisitions are both strongly associated with abnormal stock returns, these effects do not explain the positive association; and (4) once the four factor model is supplemented with the Cremers, Nair & John (2009) takeover factor – which captures risk associated with time-varying investment opportunities and thus relates to the state of the M&A market – the association disappears.
Atanu Saha & Allen Ferrell, Event Study Analysis: Correctly Measuring the Dollar Impact of an Event (Harv. L. & Econ. Discussion Paper, 2011).
Categories:
Corporate Law & Securities
,
Civil Practice & Procedure
Sub-Categories:
Shareholders
,
Corporate Law
,
Litigation & Settlement
Type: Article
Abstract
Using the traditional event study approach in the context of securities litigation, the determination of the "materiality" of a firm disclosure hinges on the statistical significance of the abnormal share price change (i.e., return) on the disclosure day. To estimate per share damages, the abnormal return is then transformed to an abnormal dollar impact. It is often assumed that if the abnormal return on a disclosure day is statistically significant, so is the abnormal dollar effect. We demonstrate - first analytically and then through an empirical example - that need not be the case. We derive the proper t-statistic if one wishes to determine the statistical significance of an abnormal dollar effect. This has obvious implications for liability and damages in securities litigation matters.
Allen Ferrell & Atanu Saha, Securities Litigation and the Housing Market Downturn, 35 J. Corp. L. 97 (2009).
Categories:
Corporate Law & Securities
,
Banking & Finance
,
Civil Practice & Procedure
Sub-Categories:
Financial Markets & Institutions
,
Securities Law & Regulation
,
Class Action Litigation
Type: Article
Abstract
This paper addresses one of the key issues – the foreseeability of the housing market downturn that began in September of 2007 and intensified in the fourth quarter of 2007 – that must be addressed in assessing the extensive securities class action litigation that has been filed against financial institutions (and others) seeking to recover damages for investor losses arising out of the credit market crisis. We begin our analysis of this issue by first discussing the legal centrality of this issue to much of this litigation. We then turn to answer the question of when the housing market downturn became foreseeable by analyzing housing prices (regional and nationwide), housing sales, housing future contracts, and various market spreads such as the ABX triple A indexes. We conclude that these data are consistent with the view that the housing market downturn was in fact not foreseen by the market prior to the fourth quarter of 2007.
Lucian Bebchuk, Alma Cohen & Allen Ferrell, What Matters in Corporate Governance?, 22 Rev. Fin. Stud. 783 (2009).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Abstract
We investigate the relative importance of the twenty-four provisions followed by the Investor Responsibility Research Center (IRRC) and included in the Gompers, Ishii, and Metrick governance index (Gompers, Ishii, and Metrick 2003). We put forward an entrenchment index based on six provisions: staggered boards, limits to shareholder bylaw amendments, poison pills, golden parachutes, and supermajority requirements for mergers and charter amendments. We find that increases in the index level are monotonically associated with economically significant reductions in firm valuation as well as large negative abnormal returns during the 1990-2003 period. The other eighteen IRRC provisions not in our entrenchment index were uncorrelated with either reduced firm valuation or negative abnormal returns.
Allen Ferrell, Jennifer Bethel & Gang Hu, Legal and Economic Issues in Litigation Arising from the 2007-2008 Credit Crisis, in Prudent Lending Restored: Securitization After the Mortgage Meltdown 163 (Yasuyuki Fuchita, Richard Herring & Robert Litan eds., 2009).
Categories:
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Investment Products
Type: Article
Abstract
This paper explores the economic and legal causes and consequences of the 2007-2008 credit crisis. We provide basic descriptive statistics and institutional details on the mortgage origination process, mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). We examine a number of aspects of these markets, including the identity of MBS and CDO sponsors, CDO trustees, CDO liquidations, MBS insured and registered amounts, the evolution of MBS tranche structure over time, mortgage originations, underwriting quality of mortgage originations, and writedowns of the commercial and investment banks. We discuss the financial difficulties faced by investment and commercial banks. In light of this discussion, the paper then addresses questions as to whether these difficulties might have been foreseen, and some of the main legal issues that will play an important role in the extensive litigation (summarized in the paper) that is underway, including the Rule 10b-5 class-action lawsuits that have already been filed against the banks, pending ERISA litigation, the causes-of-action available to MBS and CDO purchasers, and litigation against the rating agencies. In the course of this discussion, the paper discusses three principles that will likely prove central in the resolution of the securities class-action litigation: (1) "no fraud by hindsight"; (2) "truth on the market"; and (3) "loss causation."
Allen Ferrell & Jennifer Bethel, Policy Issues Raised by Structured Products, in New Financial Instruments and Institutions: Opportunities and Policy Challenges 167 (Robert E. Litan & Yasuyuki Fuchita eds., 2007).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Financial Markets & Institutions
,
Investment Products
,
Securities Law & Regulation
Type: Book
Abstract
One of the most important changes in modern finance over the last three decades is the increased understanding and use of financial derivatives. These contracts, which include options, futures, and swaps, are created by financial firms for corporate issuers who seek to tailor their liability claims and lower their costs of capital. ...
Allen Ferrell, Mandated Disclosure and Stock Returns: Evidence from the Over-the-Counter Market, 36 J. Legal Stud. 213 (2007).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Article
Abstract
Mandated disclosure requirements placed on publicly-traded firms constitute the core of U.S. securities regulation. Despite their importance, few empirical studies have been done on the impact of mandated disclosure requirements on the capital markets. Using a unique database created for this study, this paper examines the impact the 1964 imposition of mandated disclosure requirements had on the over-the-counter market in terms of stock returns, volatility and stock price synchronicity. Despite this being the only fundamental change in the scope of mandated disclosure in the U.S. in the twentieth century - with the exception of the initial securities acts of the 1930s - this regulatory change has never been examined. This study finds that there was a dramatic reduction in the volatility of OTC stock returns associated with the imposition of mandated disclosure. At the same time, there was no change stock price synchronicity associated with mandated disclosure. The evidence on stock returns is consistent with a positive abnormal return associated with the imposition of mandatory disclosure.
Allen Ferrell, The Case for Mandatory Disclosure In Securities Regulation Around the World, 2 Brook. J. Corp. Fin. & Com. L. (2007).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Article
Abstract
The desirability of mandatory disclosure requirements in securities regulation has been the subject of a longstanding debate among corporate law scholars and economists. The debate has largely focused on the desirability of mandatory disclosure requirements in the United States, a country characterized by dispersed ownership structures. This article argues that there are strong theoretical reasons to believe that mandatory disclosure requirements can play a socially useful role in countries with concentrated ownership structures. Controlling shareholders will tend to prefer poor firm transparency, to protect their private benefits of control, even if the presence of a demanding disclosure regime would have the socially desirable effect of increasing competition in the capital and product markets and reducing the agency costs associated with concentrated ownership structures. Recent empirical work is consistent with mandatory disclosure requirements fulfilling the valuable role of enhancing competition and reducing agency costs.
Reena Aggarwal, Allen Ferrell & Jonathan G. Katz, U.S. Securities Regulation in a World of Global Exchanges (Harvard Law & Econ. Discussion Paper No. 569, ECGI - Finance Working Paper No. 146/2007, Dec. 11, 2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Other
Abstract
Recently there has been a dramatic change in the organizational structure of exchanges as they have demutualized and converted into for-profit entities. This has been accompanied by a public listing of shares on the exchange itself. These changes have been driven by technological and competitive forces and have resulted in a new paradigm for the governance of exchanges. The new organizational structure has raised several regulatory issues. At the same time that exchanges have themselves become public companies, there have also been major changes in the governance requirements of listed companies that trade on exchanges. Many of these changes have been prompted by the Sarbanes-Oxley legislation, new exchange regulations, and changes mandated by the SEC. The new requirements have impacted the capital raising process globally and the choice of listing venue. These developments have in turn intensified competition among exchanges and may lead to a wave of cross-border consolidations. Globalization of exchanges will create challenges for nation-based regulation and we offer some suggestions for resolving the regulatory impediments.
Allen Ferrell, Why European Takeover Law Matters, in Reforming Company and Takeover Law in Europe (Guido Ferrarini, Klaus J. Hopt, Japp Winter & Eddy Wymeersch eds., 2004).
Categories:
International, Foreign & Comparative Law
,
Corporate Law & Securities
Sub-Categories:
Mergers & Acquisitions
,
European Law
Type: Book
Allen Ferrell, If We Understand the Mechanisms, Why Don't We Understand Their Output?, 28 J. Corp. L. 503 (2003).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Securities Law & Regulation
Type: Article
Abstract
Despite the considerable research that has occurred over the twenty years following the publication of Ronald Gilson's and Reinier Kraakman's article, The Mechanisms of Market Efficiency, there still remains a fundamental puzzle concerning the price fluctuations of securities. The explanatory power - the R squared - of various models used by financial economists to explain security price fluctuations is quite low, in the range of .20 to .30. What accounts for the other 70% to 80% of price fluctuations? This paper explores the challenges this puzzle poses to our understanding of security markets, the role played by mechanisms of market inefficiency (noise traders) as well as various mechanisms of market efficiency (information revelation via trading; the firm as arbitrageur) and the impact of legal institutions and practices on the operation of security markets.
Lucian Bebchuk, Alma Cohen & Allen Ferrell, Does the Evidence Favor State Competition in Corporate Law?, 90 Calif. L. Rev. 1775 (2002).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Business Organizations
,
State & Local Government
Type: Article
Victor Brudney & Allen Ferrell, Corporate Charitable Giving, 69 U. Chi. L. Rev. 1191 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Shareholders
Type: Article
Lucian A. Bebchuk, & Allen Ferrell, On Takeover Law and Regulatory Competition, 57 Bus. Law. 1047 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Securities Law & Regulation
,
Mergers & Acquisitions
,
Corporate Law
,
Corporate Governance
Type: Article
Allen Ferrell, Floor Versus Screen Trading in the Stock Market: Comment, 158 J. Inst'l. & Theoretical Econ. 63 (2002).
Categories:
Banking & Finance
Sub-Categories:
Investment Products
,
Financial Markets & Institutions
Type: Article
Allen Ferrell, Much Ado About Order Flow, Reg. Mag., Spring 2002, at 58.
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Article
Abstract
Focuses on the payment for order flow practice in which prices securities markets offer payments to brokers in exchange for brokers routing orders of investors to them. Ways to restructure a securities market represented by auction and dealers market; Inefficiencies in broker routing of investors' orders to securities market; Discussion on the regulatory structures that have been developed by the Securities and Exchange Commission.
Lucian A. Bebchuk & Allen Ferrell, Federal Intervention to Enhance Shareholder Choice, 87 Va. L. Rev. 993 (2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Shareholders
,
Corporate Law
,
Federalism
Type: Article
Allen Ferrell, A Proposal for Solving the 'Payment for Order Flow' Problem, 74 S. Cal. L. Rev. 1027 (2001).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Article
Abstract
An issue that has increasingly occupied the attention of the Securities and Exchange Commission is “payment for order flow.” This is the practice whereby securities markets compete for orders placed by brokers by providing side payments to brokers in return for brokers promising to send them investors’ orders. Does this create inefficient nonprice competition between securities markets? This Article argues that it does, that all the proposed solutions (including the SEC’s disclosure requirements) miss the mark, and that the problem is really a result of the SEC’s regulation of the prices at which investors’ orders must be filled. As this paper will show, permitting brokers to credit investors’ orders with the National Best Bid or Offer (NBBO) price regardless of any price improvement realized on these orders would ensure an efficient allocation of investors’ orders across securities markets.
Lucian A. Bebchuk, & Allen Ferrell, A New Approach to Takeover Law and Regulatory Competition, 87 Va. L. Rev. 111 (2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Mergers & Acquisitions
,
Shareholders
,
Federalism
Type: Article
Lucian A. Bebcuk & Allen Ferrell, Federalism and Takeover Law: The Race to Protect Managers from Takeovers, in Regulatory Competition and Economic Integration 68 (D. Esty & D. Geradin eds., Oxford Univ. Press 2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
,
Mergers & Acquisitions
,
Federalism
Type: Book
Lucian A. Bebchuk, & Allen Ferrell, Federalism and Takeover Law: The Race to Protect Managers from Takeovers, 99 Colum. L. Rev. 1168 (1999).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
,
Mergers & Acquisitions
,
Federalism
Type: Article

Current Courses

Course Catalog View

Griswold 303

617-495-8961

Assistant: Wendy Moore / 617-496-2865