Event Studies and the Law: Part II - Empirical Studies of
Corporate Law

Bhagat, Sanjai; Romanò, Roberta

doi:10.2139/ssrn.268285

Cited by 54 publications

(33 citation statements)

References 50 publications

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“…While some have contested this finding (e.g., , the results hold in the sample used in this study (Eldar, 2017). Moreover, largely all event studies have shown that incorporation in Delaware is associated with positive, albeit small, abnormal returns (Bhagat & Romano, 2002). Consistent with our findings, the main explanation for this is that Delaware incorporation facilitates takeover activity (Romano, 1985;).…”

Section: Shareholder Valuesupporting

confidence: 90%

Regulatory Competition and the Market for Corporate Law

Eldar

Magnolfi

2015

SSRN Journal

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This article develops an empirical model of firms' choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a novel database of incorporation decisions from 1995-2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada's rise is due to the preferences of small firms. Our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws. Our findings support the hypothesis that Delaware faces competitive pressure to maintain its current laws, and that managers are willing to commit to such laws in order to attract capital.

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Section: Shareholder Valuesupporting

confidence: 90%

Regulatory Competition and the Market for Corporate Law

Eldar

Magnolfi

2015

SSRN Journal

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“…Most suits are filed very quickly, often within hours or days of an event (Thompson and Thomas 2003). 10 Evidence also shows that the announcement effects of shareholder suits are zero (Fischel and Bradley 1986) or negative (Bhagat et al 1998; see also Bhagat and Romano 2002). In addition, the Business Judgment Rule provides another layer of protection to boards and officers.…”

Section: The Law Fills the Judicial Void For Stakeholdersmentioning

confidence: 99%

The Corporate Objective Revisited

Sundaram

Inkpen

2004

Organization Science

553

221

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T he stock market convulsions and corporate scandals of 2001 and 2002 have reignited debate on the purposes of the corporation and, in particular, the goal of shareholder value maximization. We revisit the debate, re-examine the traditional rationales, and develop a set of new arguments for why the preferred objective function for the corporation must unambiguously continue to be the one that says "maximize shareholder value." We trace the origins of the debates from the late nineteenth century, their implications for accepted law and practice of corporate governance in the United States, and their reflection in shareholder versus stakeholder views in the organization studies literature and contractarian versus communitarian views in the legal literature. We address in detail possible critiques of the shareholder value maximization view. Although we recognize certain boundary constraints to our arguments, we conclude that the issues raised by such critiques and constraints are not unique to the shareholder value maximization view, but will exist even if the firm is managed on behalf of nonshareowning stakeholders.

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“…15 This implication of the model is worth highlighting in light of the approach taken by much of the empirical work on state competition. Substantial work has focused on the effects of reincorporation to Delaware and has concluded that such reincorporation produces increases in stock market prices (see Bhagat and Romano (2001), and Bebchuk, Cohen, and Ferrell (2002) for a survey). In addition, some recent work has focused on differences in Tobin's Q among states, and has concluded that incorporation in Delaware increases Tobin's Q compared with incorporation in other states (see Daines (2001)).…”

Section: The Equilibrium Benefits Of Incorporating In Delawarementioning

confidence: 99%

The Market for Corporate Law

Bar‐Gill¹,

Barzuza²,

Bebchuk³

2002

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This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations.The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.

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Event Studies and the Law: Part II - Empirical Studies of Corporate Law

Cited by 54 publications

References 50 publications

Regulatory Competition and the Market for Corporate Law

Regulatory Competition and the Market for Corporate Law

The Corporate Objective Revisited

The Market for Corporate Law

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