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- Title
FRAUDULENT CORPORATE SIGNALS: CONDUCT AS SECURITIES FRAUD.
- Authors
UTSET, MANUEL A.
- Abstract
Paying a dividend, repurchasing shares, underpricing an initial public offering, pledging collateral, and borrowing using short-term, in-stead of long-term debt, are all forms of corporate communications. They are "corporate signals" that tell investors certain things about a company's operations and current financial position, and about the managers' con-fidence in its future performance. This Article provides the first compre-hensive analysis of the relationship between corporate signals and securi-ties fraud. The incentive to communicate using corporate signals has increased in recent years, a phenomenon that, I argue, is due to the grow-ing complexity of public corporations, and, importantly, to a number of changes in federal securities laws aimed at better deterring fraud and making companies more transparent. The Article makes diree major con-tributions. First, it identifies this deep connection between the use of cor-porate signals (both truthful and deceptive) and recent changes in secu-rities laws. Second, it identifies significant social costs associated with corporate signaling, which commentators and policymakers have over-looked: signals can encourage stock bubbles, create costly "signaling races," and lead to the loss of information about companies and indus-tries. Third, it provides a normative account of how a lawmaker could de-sign antifraud provisions under the securities laws in order to reduce total fraud, instead of simply rechanneling deceptive practices from the realm of written and oral statements to that of deceptive corporate signals.
- Subjects
UNITED States; SECURITIES industry laws; SECURITIES fraud -- Law &; legislation; STOCK repurchasing; DIVIDENDS; LONG-term debt; SHORT-term debt; GOING public (Securities)
- Publication
Boston College Law Review, 2013, Vol 54, Issue 2, p645
- ISSN
0161-6587
- Publication type
Article