Does the Evidence Favor State Competition in Corporate Law

By L. Bebchuk, Alma Cohen, Allen Ferrell. 2002

116 citations recorded by the source corpus.

In the ongoing debate on state competition over corporate charters, supporters of state competition have long claimed that the empirical evidence clearly supports their view. This paper suggests that the body of empirical evidence on which supporters of state competition have relied does not warrant this claim. The paper first demonstrates that reported findings of a positive correlation between incorporation in Delaware and increased shareholder wealth are not robust and, furthermore, do not establish causation. The paper then shows that, even if Delaware incorporation were found to cause an increase in shareholder value, this finding would not imply that state competition is working well; benefits to incorporating in the dominant state would likely exist in a race-toward-the bottom' equilibrium in which state competition provided undesirable incentives. Third, the analysis shows that empirical claims that state competition rewards moderation in the provision of antitakeover protections are not well grounded. Finally, we endorse a new approach to the empirical study of the subject that is based on analyzing the determinants of companies' choices of state of incorporation. Recent work based on this approach indicates that, contrary to the beliefs of state competition supporters, states that amass antitakeover statutes are more successful in the incorporation market.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/b750f5d390b57488184185b53a5a0c3037879452

How researchers see this paper

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In Accounting

1. David F. Larcker
2. Christopher S. Armstrong
3. Christopher D. Ittner
4. John E. Core
5. Terry Shevlin
6. Jennifer Blouin
7. W. Guay
8. Shivaram Rajgopal

In Strategy and Management

1. David F. Larcker
2. Christopher S. Armstrong
3. Christopher D. Ittner
4. John E. Core
5. Jean-François Henri
6. Collins G. Ntim
7. Jan Bouwens
8. Laurence van Lent

Citations in the corpus

• Corporate governance, compensation consultants, and CEO pay levels (2012, methodology): “Finally, following Bebchuk et al. (2002), Cheng et al. (2005), and Wahal et al.”
• European Takeover Regulation (2003, unknown): “6 There are five standard types of anti-takeover statutes: control share acquisition statutes, fair price statutes, business combination statutes, poison pill endorsement statutes, and constituency statutes (Bebchuk et al., 2002).”