References (62)



Good Monitoring, Bad Monitoring

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management

Stefano Rossi

Krannert School of Management; Centre for Economic Policy Research (CEPR)

January 31, 2012

Are courts effective monitors of corporate decisions? In a controversial landmark case, the Delaware Supreme Court held directors personally liable for breaching their fiduciary duties, signaling a sharp increase in Delaware’s scrutiny over corporate decisions. In low-growth industries, Delaware firms outperformed matched non-Delaware firms by 1% in the three days around the decision. In contrast, in high-growth industries, Delaware firms under-performed by 1%. Contrary to previous literature, we conclude that court decisions can have large, significant and heterogeneous effects on firm value, and that rules insulating directors from court scrutiny benefit the fastest growing sectors of the economy.

Number of Pages in PDF File: 50

Keywords: monitoring, corporate governance, case law, regulation

JEL Classification: G32, G34, G38, L51

working papers series

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Date posted: August 7, 2011 ; Last revised: March 17, 2012

Suggested Citation

Grinstein, Yaniv and Rossi, Stefano, Good Monitoring, Bad Monitoring (January 31, 2012). Available at SSRN: http://ssrn.com/abstract=1906326 or http://dx.doi.org/10.2139/ssrn.1906326

Contact Information

Yaniv Grinstein
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)
Stefano Rossi (Contact Author)
Krannert School of Management ( email )
West Lafayette, IN 47907-1310
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  62

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