The Hindsight Bias On the problem of ex ante knowledge in negligence assessment ex post

Abstract: Judging negligence correctly is notoriously difficult once a catastrophic result is known to the individual making the judgement. Due to a phenomenon called hindsight bias, the events leading up to a specific outcome seem significantly more self-evident in hindsight than they did moving forward in time. In a forensic setting, judges are expected by law to ponder foreseeability ex ante, even though the result is presented in the file. Not only are legal practitioners typically unaware of the hindsight bias; disappointingly, empirical research suggests that even warning them of it does little to circumvent its effects. The main article is only...

Why lab experiments are a powerful tool for legal scholarship

Many questions formulated by legal scholars address a causal relationship between the law and human behavior: What is the effect of “teaser rates” on credit card debt? Will delegation of decision-making diminish the “stickiness of default rules”? Does a key information document improve retail investors’ understanding of investment products? Behavioral law and economics can help answering these questions, as it provides predictions about people’s behavior in a legally relevant context. Its increasing use in policy-making and law calls for an understanding of how these predictions are formulated and tested. Laboratory experiments are an important empirical method employed to this end. Thus, it comes at no surprise that...

Related Party Transactions of Listed Companies in Germany

Common law jurisdictions pride themselves on having a keen sense of fiduciary relationships and the perils of self-dealing. While the UK’s influence on EU law may recede in the long run, it has left another lasting impression in the EU’s revised Shareholder Rights Directive that regulates corporate governance aspects of European listed companies. Besides encouraging stewardship by institutional investors and ensuring shareholders a „vote on pay“, the directive introduces a new set of provisions on the company’s dealings with related parties—parents, sibling entities, controlled and associated entities, and managers. The rules on related party transactions (RPTs) are evidently inspired by, and modelled on, Chapter 11 of the UK’s Listing...

Standardization of State Exams or Competition in the Federal System?

Abstract | German legal education is in part determined by federal law and in part by the local law of the German states. In order to ensure the compatibility of the examinations the Conference of the Ministers of Justice has discussed a variety of measures. Unfortunately, this discussion was not accompanied by empirical research on the existence and impact of such differences. However, a statistical study about students moving from one state to the other gives, at least, hints about this question. Together with other available data on the university part of the State Examination the study provides arguments why the current differences between the legal education statutes of the German states are less important than differences in the...

Is There a Relationship Between Shareholder Protection and Stock Market Development?

Does the quality of legal and other institutions make a difference to economic development and growth? In their very well-known studies of the relation between law and finance, Andrei Shleifer and his collaborators (in particular Rafael La Porta and Simeon Djankov) found evidence to support this claim. Their econometric analysis showed that higher levels of shareholder and creditor protection were correlated with increased financial development. This work became highly influential among researchers and policy-makers. Since the mid-1990s, the widespread belief has been that strengthening share-holder and creditor rights will lead to improved financial outcomes. This view became a mainstay of global policy initiatives, including...

Are apex court judges politically biased?

The question whether judges are politically biased is highly disputed. Some consider it a heresy even to ask the question, while others believe it to be a self-evident truism. If we look at how controversial the nomination procedures for new justices to the U.S. Supreme Court are, we see that most participants in the U.S. political process at least believe that justices are influenced by their political ideology. There is some empirical evidence confirming this belief. The seminal contribution on this issue is a study by Jeffrey Segal and Albert Cover. The authors construct an ideology score for Supreme Court Justices, which is based on newspaper reports regarding these judges prior to their election to the Court. The study finds a high correlation between...