391. Guhan Subramanian, The Disappearing Delaware Effect, 11/2002; subsequently published in Journal of Law, Economics & Organization, Vol. 20, No. 1, 2004, 32-59.
Abstract: Refining and extending the methodology introduced by Daines (2001), I present evidence that firms incorporated in Delaware were worth 2-3% more than non-Delaware firms during the period 1991-1996, but not significantly more after 1996. I present two potential explanations for this "disappearing" Delaware effect. First, doctrinal movements in the mid-1990s might have solidified the Just Say No defense in Delaware, making Delaware's corporate law undifferentiated from the corporate law of other states. Second, "adaptive devices" (Kahan & Rock 2002), notably the increase in stock compensation during the 1990s, might have made takeover law no longer a binding constraint in many M&A transactions. I find some support in the empirical evidence for both of these explanations.