The Shareholder Wealth Effects of Delaware Litigation

Badawi, Adam B.; Chen, Daniel L.

doi:10.1093/aler/ahx015

Cited by 8 publications

(4 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Nonetheless, this study suggests a few directions for future research. For example, given that changing legal domiciles means changing the applicable corporate law, researchers can examine the wealth effects of litigation in corporate laws following the reincorporation of newly public firms (Badawi and Chen 2017). It is also plausible to investigate whether Delaware reincorporation is associated with better information disclosure and high analyst coverage (Stewart 2023).…”

Section: Discussionmentioning

confidence: 99%

Delaware Reincorporation and the Double-Exit Puzzle: Evidence from Post-Initial Public Offering Acquisitions

Xu,

Jia,

Qian

et al. 2024

IJFS

View full text Add to dashboard Cite

Initial public offerings and mergers and acquisitions represent important opportunities for investors to exit and harvest their entrepreneurial success. Some firms are acquired shortly after their initial public offerings. This exit strategy is known as a double exit. In addition, issuing firms may choose to reincorporate in Delaware during their IPOs. In this study, we use hand-collected data from 1993 to 2020 to investigate whether and to what extent Delaware reincorporation may affect the M&As in the post-IPO stage. We use a Cox proportional hazard model to test the relation between Delaware reincorporation and the likelihood of being acquired for our sample IPOs. Recognizing that Delaware reincorporation is not a random decision, we adopt a Heckman switching regression method to estimate the relation between Delaware reincorporation and takeover premiums and announcement returns. We report that IPO firms choosing to reincorporate in Delaware experience a higher likelihood of being acquired compared to those IPO firms choosing to remain incorporated in their home states. We further document that IPO firms choosing to reincorporate in Delaware receive lower premiums in acquisitions, and experience lower abnormal returns on announcements.

show abstract

Section: Discussionmentioning

confidence: 99%

Delaware Reincorporation and the Double-Exit Puzzle: Evidence from Post-Initial Public Offering Acquisitions

Xu,

Jia,

Qian

et al. 2024

IJFS

View full text Add to dashboard Cite

show abstract

“…The court decision is taken as precedent by subsequent courts. Also, judge identity do not predict stock prices at the time of resolution controlling for the manner in which the case was resolved and judge identity do not predict stock prices at the moment that judges are revealed (Badawi and Chen, 2014).…”

Section: Interpretation Of 2slsmentioning

confidence: 91%

Government Expropriation Increases Economic Growth and Racial Inequality: Evidence from Eminent Domain

Chen

Yeh²

2017

SSRN Journal

Self Cite

View full text Add to dashboard Cite

Is it justified for states to appropriate private property rights? If so, should governments expropriate or regulate? We test three conventional views: insecure property rights cause underinvestment, moral hazard cause overinvestment, or public use cause economic growth. We embed these mechanisms in a model and measure them using the random assignment of U.S. federal court judges setting geographicallylocal precedent. For a half-century, racial minority Democrats were more likely to strike down government appropriations while Republican former federal prosecutors were more likely to uphold them. We find that pro-government physical takings precedent stimulated subsequent takings, expropriation of larger parcels, highway construction, and growth in construction, transportation, and government sectors as well as agriculture, retail, and financial sectors, overall economic growth, and property values. However, racial minorities were increasingly displaced, unemployed, and living in public housing, and the service sector declined. Pro-government regulatory takings precedent also spurred economic growth and property values, but did not increase displacement or racial inequality.

show abstract

“…They argue that the threat of litigation imposes ex ante disciplining forces that align managers’ interests with those of shareholders. On the other hand, some criticize that many shareholder litigations are frivolous and they often benefit only attorneys who bring these claims but not plaintiff shareholders (i.e., an ex post wealth transfer from shareholders to attorneys) (e.g., Badawi & Chen, 2017; Bhagat et al., 1998; Gande & Lewis, 2009; Graham et al., 2008; Romano, 1991). Moreover, another often‐cited but relatively unexplored concern is that litigation threat may distort managers’ incentives and lead to suboptimal decisions ex ante (i.e., an ex ante value destruction effect).…”

Section: Introductionmentioning

confidence: 99%

The dark side of shareholder litigation: Evidence from corporate takeovers

Chu

Zhao

2021

Financial Management

View full text Add to dashboard Cite

Exploiting staggered adoption of the universal demand (UD) laws by 23 states between 1989 and 2005 that makes filing shareholder derivative litigations more difficult, we show that reduced litigation threats improve corporate takeover efficiency. Using a difference‐in‐differences approach, we find that acquirers experience higher announcement returns and better postmerger operating performance after the UD laws. Further analysis suggests that acquirers make suboptimal merger decisions to avoid litigation. Taken together, we show that litigation risk can distort managers’ incentives and destroy value ex ante.

show abstract

The Shareholder Wealth Effects of Delaware Litigation

Cited by 8 publications

References 10 publications

Delaware Reincorporation and the Double-Exit Puzzle: Evidence from Post-Initial Public Offering Acquisitions

Delaware Reincorporation and the Double-Exit Puzzle: Evidence from Post-Initial Public Offering Acquisitions

Government Expropriation Increases Economic Growth and Racial Inequality: Evidence from Eminent Domain

The dark side of shareholder litigation: Evidence from corporate takeovers

Contact Info

Product

Resources

About