The CLS Blue Sky Blog

The novel coronavirus (COVID-19) pandemic has drastically affected the global economy and offers a unique setting to investigate firm and market behavior through periods of heightened economic uncertainty. During the pandemic, many U.S. public firms withdrew their quarterly and annual guidance on their firms’ financial outlook. According to Intelligize, 851 companies announced the withdrawals of their management guidance between March 16 and May 31, 2020.[1] In contrast, guidance withdrawals were rare prior to the…

The CLS Blue Sky Blog

Economic Downturns and the Informativeness of Management Earnings Forecasts

By David A. Maslar, Matthew Serfling & Sarah Shaikh

October 15, 2021

Economic downturns brought about by events such as the financial crisis and COVID-19 pandemic create substantial uncertainty for companies. While some firms endure the downturns unscathed or even thrive, others see their businesses decline drastically and their bankruptcy risk increase. The heightened uncertainty makes it especially difficult for market participants, such as investors and analysts, who rely on personal experience and public information to assess how a particular firm will perform during a downturn. In…

The CLS Blue Sky Blog

Wachtell Lipton on Dealing with Activist Hedge Funds and Other Activist Investors

By Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles & Anna Dimitrijević

October 13, 2021

Despite a short dip at the outset of the pandemic, activism has rebounded and now continues at an ever-growing intensity. As we have previously noted, regardless of industry, size or performance, no company should consider itself immune from activism. No company is too large, too popular, too new or too successful. Even companies that are respected industry leaders and have outperformed the market and their peers have been and are being attacked. And companies that…

The CLS Blue Sky Blog

New SEC Enforcement Director Speaks on Promoting Market Integrity

By Gurbir Grewal

October 11, 2021

Thank you for that introduction and for having me here today. At the Division of Enforcement, ensuring that broker-dealers and associated individuals follow our laws and regulations is critical to our mission, so it’s only fitting that my first speech as Director is at this event. While I just referred to it as “our mission” at the Division of Enforcement, what I’d like to talk to you about today is how we all share the…

The CLS Blue Sky Blog

SEC Chair Gensler Testifies Before U.S. House Committee on Financial Services

By Gary Gensler

October 7, 2021

Good afternoon, Chairwoman Waters, Ranking Member McHenry, and members of the Committee. I’m honored to appear before you today for the second time as Chair of the Securities and Exchange Commission. As is customary, I will note that my views are my own, and I am not speaking on behalf of my fellow Commissioners or the staff. We are blessed with the largest, most sophisticated, and most innovative capital markets in the world. The U.S.…

The CLS Blue Sky Blog

COVID-19, Corporate Leverage, and Financial Fragility

By Sharjil M. Haque & Richard Varghese

October 5, 2021

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The COVID-19 pandemic and efforts to combat its spread were an unprecedented shock to corporate cash flows and consequent need for external financing. How did corporate leverage respond? More important, what does the impact on leverage mean for financial stability? In the U.S., firms that were most affected by the pandemic, in terms of drop in demand, are likely facing a debt overhang problem and increased risk of default. We document these recent patterns on…

The CLS Blue Sky Blog

CSR and Firm Survival: Evidence from the Pandemic and the Climate Crisis

By Thomas Chemmanur, Dimitrios Gounopoulos, Panagiotis Koutroumpis & Yu Zhang

September 30, 2021

The global challenges of climate change and COVID-19 have created a grim economic outlook, with companies fighting for their very survival. As a result, companies are boosting their brands, and ability to compete, with Corporate Social Responsibility (CSR) programs. The airline industry, for example, responded to the pandemic and pressure to reduce CO2 emissions by playing a crucial role in transporting medical equipment necessary to tackle Covid-19. This step not only contributed to the well-being…

The CLS Blue Sky Blog

Arnold & Porter Discusses ESG, Disclosure, and Whistleblowing

By Jane Norberg, Robert Azarow, Daniel M. Hawke, Brian D. Israel & Erik Walsh

September 29, 2021

On August 25, 2021, The Wall Street Journal reported that the SEC and the United States Attorney’s Office for the Eastern District of New York are investigating greenwashing allegations made by the former head of sustainability of Deutsche Bank AG’s asset-management arm, DWS Group (DWS), including allegations that DWS overstated how much it used sustainable investing criteria to manage its assets. DWS disclosed in its 2020 annual report that it invested more than half of…

The CLS Blue Sky Blog

Why Singapore Exchange’s Embrace of SPAC Listings Is a Game Changer

By Lerong Lu & Alice Lingsheng Zhang

September 27, 2021

On September 2, 2021, Singapore Exchange (SGX) released the “Proposed Listing Framework for Special Purpose Acquisition Companies” that officially permits the public listing of SPACs on its mainboard. The move aims to cement Singapore’s status as Asia’s top financial center, attract lists of regional unicorn companies in the tech industry, and satisfy the appetite of local high net-worth investors for higher-risk investments.[1] On September 17, the Singapore government launched a S$1.5 billion (US$1.1 billion)…

The CLS Blue Sky Blog

Chair Lina Khan Discusses Vision and Priorities for the Federal Trade Commission

By Lina M. Khan

September 27, 2021

Thank you [commissioners and staff] for the grace and patience you’ve displayed the last few months as my team and I have gotten up to speed on the agency’s work and processes. Navigating a leadership transition during a pandemic has posed a host of challenges, and I am so grateful for the warm welcome and support from across the Commission. The past 18 months have involved significant hardship and loss for many of us, and…