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http://ssrn.com/abstract=1644974
 
 

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What Happens in Nevada? Self-Selecting into Lax Law


Michal Barzuza


University of Virginia School of Law

David C. Smith


University of Virginia - McIntire School of Commerce

December 30, 2013

Virginia Law and Economics Research Paper No. 2011-08

Abstract:     
We find that Nevada, the second most popular state for out-of-state incorporations and a state with lax corporate law, attracts firms that are 30-40% more likely to report financial results that later require restatement than firms incorporated in other states, including Delaware. Our results suggest that firms favoring protections for insiders select Nevada as a corporate home, and these firms are prone to financial reporting failures. We provide evidence that Nevada law also has a causal impact by increasing a Nevada firm’s propensity to report financials that require restatement.

Number of Pages in PDF File: 64

Keywords: corporate law, Nevada, accounting restatements, agency costs

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Date posted: July 18, 2010 ; Last revised: February 19, 2014

Suggested Citation

Barzuza, Michal and Smith, David C., What Happens in Nevada? Self-Selecting into Lax Law (December 30, 2013). Virginia Law and Economics Research Paper No. 2011-08. Available at SSRN: http://ssrn.com/abstract=1644974 or http://dx.doi.org/10.2139/ssrn.1644974

Contact Information

Michal Barzuza (Contact Author)
University of Virginia School of Law ( email )
580 Massie Road
Charlottesville, VA 22903
United States

David Carl Smith
University of Virginia (UVA) - McIntire School of Commerce ( email )
P.O. Box 400173
Charlottesville, VA 22904-4173
United States
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