Lawyer Expertise and Contract Design—Evidence from M&A Negotiations

Bibliographic Data

ID9713230
AuthorsChristel Karsten (OMX Group, The Netherlands), Ulrike Malmendier (0000-0002-2786-4365, University of California, Berkeley, corresponding author), Zacharias Sautner (0000-0002-0780-6571, Frankfurt School of Finance & Management)
Year2022
Volume132
Issue642
Pages644-674
Publication date2022-02-22
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueab047
OpenAlexW3166546986
LanguageEN
References cited27

We argue that the relative expertise of contracting parties strongly affects contractual outcomes. Using unique data on company acquisition contracts, we document that lawyers with higher expertise relative to their counterparties negotiate better risk allocation for their clients and more favourable target prices. The benefits of high expertise outweigh its costs, largely because high-expertise lawyers economise on transaction costs by shortening negotiation times. Our findings suggest a need for explicit modelling of contracting skills, and they help explain heterogeneity in legal fees across law firms and the role of league tables of law firms

Actuarial science · Business · Database transaction · Economics · Industrial organization · Law and economics · Microeconomics · Negotiation · Political science · Transaction cost · Auditing, Earnings Management, Governance · Corporate Finance and Governance · Finance · Law · Law, Economics, and Judicial Systems

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