The Market for Justice: Burford Capital and the Litigation Finance Industry

Lauren  Cohen; Christopher  Malloy; William  Powley

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Case | HBS Case Collection | October 2017

The Market for Justice: Burford Capital and the Litigation Finance Industry

by Lauren Cohen, Christopher Malloy and William Powley

Language: English

Format: Print

16 pages

Educators

Citation:

Cohen, Lauren, Christopher Malloy, and William Powley. "The Market for Justice: Burford Capital and the Litigation Finance Industry." Harvard Business School Case 218-007, October 2017.

About the Authors

Lauren H. Cohen

L.E. Simmons Professor of Business Administration

Finance

Entrepreneurial Management

View Profile »
View Publications »

Christopher J. Malloy

Sylvan C. Coleman Professor of Financial Management

Finance

Entrepreneurial Management

View Profile »
View Publications »

More from these Authors

Working Paper | 2018

IQ from IP: Simplifying Search in Portfolio Choice

Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou, Christopher J. Malloy, Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou and Christopher J. Malloy

Using a novel database that tracks web traffic on the SEC’s EDGAR servers between 2004 and 2015, we show that mutual fund managers gather information on a very particular subset of firms and insiders, and their surveillance is very persistent over time. This tracking behavior has powerful implications for their portfolio choice, and its information content. An institution that downloaded an insider-trading filing by a given firm last quarter increases its likelihood of downloading an insider-trading filing on the same firm by more than 41.3% this quarter. Moreover, the average tracked stock that an institution buys generates annualized alphas of between 9-18% relative to the purchase of an average non-tracked stock. We find that institutional managers tend to track members of the top management teams of firms (CEOs, CFOs, Presidents, and Board Chairs), and tend to share educational and location-based commonalities with the specific insiders they choose to follow. Collectively, our results suggest that the information in tracked trades is important for fundamental firm value, and is only revealed following the information-rich dual trading by insiders and linked institutions.

Citation:
Chen, Huaizhi, Lauren Cohen, Umit Gurun, Dong Lou, and Christopher J. Malloy. "IQ from IP: Simplifying Search in Portfolio Choice." NBER Working Paper Series, No. 24801, July 2018. View Details

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Working Paper | 2018

IQ from IP: Simplifying Search in Portfolio Choice

Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou, Christopher J. Malloy, Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou and Christopher J. Malloy

Using a novel database that tracks web traffic on the SEC’s EDGAR servers between 2004 and 2015, we show that mutual fund managers gather information on a very particular subset of firms and insiders, and their surveillance is very persistent over time. This tracking behavior has powerful implications for their portfolio choice, and its information content. An institution that downloaded an insider-trading filing by a given firm last quarter increases its likelihood of downloading an insider-trading filing on the same firm by more than 41.3% this quarter. Moreover, the average tracked stock that an institution buys generates annualized alphas of between 9-18% relative to the purchase of an average non-tracked stock. We find that institutional managers tend to track members of the top management teams of firms (CEOs, CFOs, Presidents, and Board Chairs), and tend to share educational and location-based commonalities with the specific insiders they choose to follow. Collectively, our results suggest that the information in tracked trades is important for fundamental firm value, and is only revealed following the information-rich dual trading by insiders and linked institutions.

Citation:
Chen, Huaizhi, Lauren Cohen, Umit Gurun, Dong Lou, and Christopher J. Malloy. "IQ from IP: Simplifying Search in Portfolio Choice." NBER Working Paper Series, No. 24801, July 2018. View Details

Cite View Details Read Now Read Now Related
Case | HBS Case Collection | May 2018 (Revised June 2018)

Ashar Group: Brokers and Co-opetition in the Life Settlement Industry

Alexander Braun, Lauren H. Cohen, Christopher J. Malloy, Jiahua Xu, Alexander Braun, Lauren H. Cohen, Christopher J. Malloy and Jiahua Xu

Connecting life insurance policyholders with potential investors (called Life Settlement Providers), Ashar Group plays a pivotal role in the industry. Its current position is, however, increasingly being challenged by consumer-direct models, led by major providers seeking to shortcut brokers. Ashar faces a strategic dilemma in cooperating—but also in competing—with these providers. Maintaining a mutually beneficial dynamic with policyholders, downstream intermediaries, and other actors thus constitutes a balancing act. The context of this case is an underdeveloped market whose reputation has suffered from broker misconduct. In light of the market’s legacy issues and competing business models, this case study explores strategies Ashar may pursue to secure and enhance its market position. Discussions emerging from this case study have the potential to illuminate directions for market transformation.

Keywords: Insurance; Investment; Markets; Competitive Strategy; Cooperation; Financial Services Industry;

Citation:
Braun, Alexander, Lauren H. Cohen, Christopher J. Malloy, and Jiahua Xu. "Ashar Group: Brokers and Co-opetition in the Life Settlement Industry." Harvard Business School Case 218-109, May 2018. (Revised June 2018.) View Details

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The Market for Justice: Burford Capital and the Litigation Finance Industry

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About the Authors

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