Handbook on Law, Innovation and Growth
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Handbook on Law, Innovation and Growth

Edited by Robert E. Litan

A central goal of any economy is to achieve rapid and sustained growth. This cannot happen without continued innovation. This landmark Handbook brings together many of the world’s legal scholars to examine features of the legal infrastructure that affect both innovation and growth. Individual chapters explore different legal subject areas, in most cases offering recommendations for rule changes that could accelerate growth, primarily in the context of the US economy. The introductory chapter provides a framework for these discussions and explains why it is time for legal scholarship and research to move in that direction.
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Chapter 3: Integrity and Innovation in the Public Capital Markets: A Survey of the Securities Law Literature

James C. Spindler


James C. Spindler 3.1 INTRODUCTION: COMPELLING INFORMATION, OR PERMITTING INNOVATION? In this chapter, I survey the academic securities law literature that bears on innovation and economic growth. As it turns out, such a task is somewhat difficult because the securities literature usually does not discuss innovation and societal welfare in explicit terms. Rather, because securities law is concerned with information and the functioning of the capital markets, there is a tendency to focus on two proxies for economic efficiency that are direct functions of the informational environment: liquidity and price accuracy.1 More and better information tends to promote both liquidity and price accuracy, which often (though not always, as I will discuss) will in turn promote socially optimal economic production. More liquidity and greater price accuracy can imply a lower cost of capital for entrepreneurs, more efficient capital allocation, easier monitoring of managers, and other benefits, all of which lead to a greater degree of production, innovation, and economic growth. Thus, while the ultimate concern of the securities law ought to be the effect of the laws upon the real economy, for tractability’s sake this is usually couched in terms of liquidity and price accuracy. There is thus a substantial branch of securities law literature that explores how securities law provides the benefits of liquidity and price accuracy, and how best to maintain the requisite informationally-rich environment. This literature places a great emphasis on disclosing as much 1 Liquidity, as used in this chapter, is the ease with which a...

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