Abstract

http://ssrn.com/abstract=1313274
 
 

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Do Delaware CEOs Get Fired?


Murali Jagannathan


State University of New York (SUNY) at Binghamton

Adam C. Pritchard


University of Michigan Law School

June 3, 2013

U of Michigan Law & Economics, Olin Working Paper No. 08-024

Abstract:     
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 compare California firms that choose to incorporate in California – the state with arguably the most restrictive corporate law rules – with those that incorporate in Delaware. 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. On the ultimate question, we show that firms incorporated in Delaware are no less likely to terminate CEOs in the wake of poor performance. Certain governance measures that correlate with Delaware incorporation increase likelihood of termination. The evidence presented here does not support the race to the bottom hypothesis.

Number of Pages in PDF File: 46

Keywords: Corporate governance, charter competition, CEO turnover

JEL Classification: G30, G34, K22

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Date posted: December 11, 2008 ; Last revised: June 3, 2013

Suggested Citation

Jagannathan, Murali and Pritchard, Adam C., Do Delaware CEOs Get Fired? (June 3, 2013). U of Michigan Law & Economics, Olin Working Paper No. 08-024. Available at SSRN: http://ssrn.com/abstract=1313274 or http://dx.doi.org/10.2139/ssrn.1313274

Contact Information

Murali Jagannathan (Contact Author)
State University of New York (SUNY) at Binghamton ( email )
P.O. Box 6015
Binghamton, NY 13902-6015
United States
607-777-4639 (Phone)
Adam C. Pritchard
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

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