September Tip Sheet: Business, Law & Economics

Tip sheets highlight timely news and events at Washington University in St. Louis. For more information on any of the stories below or for assistance in arranging interviews, please see the contact information listed with each story.

Decimal dilemma
Switch to ‘decimalization’ in stock pricing has saved institutional investors $133 million per month, study finds


“Decimalization” – the pricing of stocks in dollars and cents instead of fractions – lauded by proponents to be a good thing for investors when it was adopted by the U.S. stock markets in early 2001, is under fire. Critics say it costs institutional investors big. But in a study co-authored by Venkatesh Panchapagesan at Washington University’s Olin School of Business, direct institutional trading costs appear to have declined by about 23 basis points (roughly 5 cents a share) after decimalization. In economic terms, this decrease translates to an average monthly savings of about $133 million in institutional trading costs, the study finds.

Soft money — The lesson from Missouri
Supreme Court should raise the First Amendment bar in landmark campaign finance regulation case, says legal scholar


With the final provision of Sarbanes-Oxley now in effect, lawyers are required to report corporate wrongdoing. Although many lawyers are concerned that this may breach attorney/client privilege, Troy Paredes, associate professor of law at the Washington University School of Law, says, “The requirement that lawyers report ‘up the ladder’ if they are aware of a material violation is an important part of the Sarbanes-Oxley reforms.” Paredes notes that lawyers are an important gatekeeper that the market depends on to help oversee management.

Starting a business
Venture capital funding validates a startup, research shows


Lessons learned by startups during the dot-com hiring frenzy may have lasting benefits, according to a study conducted by Washington University Olin School of Business professor Mahendra Gupta. His paper, “Venture Capital Financing and the Growth of Startup Firms,” which focuses on the role human capital plays in starting a company, has been accepted for publication in the Journal of Business Venturing. Journal editor Sankaran Venkataraman called the paper noteworthy in its comprehensive examination of how human capital relates to success, the internal processes of a firm, and team characteristics. Companies able to get venture capital funding had an advantage over those who were able to find funding resources but not thru v.c. funding.

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