Totally shameless self-promotion (part 2) . . . . my casebook, Corporate Finance (Aspen), has finally published. This project has been in long gestation (since 2012). Corporate finance is a really important subject. Yet, it is not as prominently offered in the business law curriculum of law school as securities regulation. I explain the relevance of the subject in the introduction in the book this way.
When a corporation issues financial instruments, two distinct spheres of law are triggered. The first is the public law regulating securities, which is covered in Securities Regulation. This is the regulatory aspect of issuing and trading securities and disclosure of information by issuers. The regulation of securities does not mandate specific substantive terms of financial contracts. The underlying philosophy is that market actors will negotiate the economic and governance terms of securities. Regulation of securities is fundamentally concerned with registration, disclosure, and the process of securities issuance and trading. These rules are complex and fundamentally procedural in nature. The second sphere of law is the mostly private law dealing with the private ordering of the substantive terms of financial instruments, those being the bundle of economic and governance rights embedded in financial instruments. Corporate Finance examines the rights and benefits of creditors, preferred stockholders, common stockholders, and holders of derivatives, and their legal and economic relationships with not just the corporate issuer, but also with each other. Corporate lawyers should have a solid grounding in both the public law and private law facets of financing transactions.
If law students think that they learn essential aspects of financial instruments in Securities Regulation, Corporations, or Business Associations, that’s mistaken. The course that delves deeply into learning financial instruments is Corporate Finance.