Do Delaware CEOs Get Fired
State University of New York (SUNY) at Binghamton
Adam C. Pritchard
University of Michigan Law School
March 23, 2015
U of Michigan Law & Economics, Olin Working Paper No. 08-024
Critics have charged that state competition in corporate law, which Delaware dominates, leads to a “race to the bottom” making management unaccountable. One metric of management accountability is forced CEO turnover, which we use to test the race to the bottom hypothesis. We find that Delaware CEOs are more likely to be forced out relative to firms incorporated in other jurisdictions. We show that aspects of Delaware law attract firms that plan to grow through merger or acquisition and are vulnerable to shareholder lawsuits. We also document differences in corporate governance that correlate with Delaware incorporation. After controlling for differences in governance, we find that firms incorporated in Delaware are still more likely to terminate CEOs, but that termination decision is less sensitive to poor performance.
Number of Pages in PDF File: 37
Keywords: Corporate governance, charter competition, CEO turnover
JEL Classification: G30, G34, K22
Date posted: December 11, 2008 ; Last revised: March 24, 2015
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