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The Disappearing Delaware Effect

Guhan Subramanian

Harvard Business School

October 2002

Harvard Law and Economics Discussion Paper No. 391

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, three takeover contests from the mid-1990s - Younkers, Wallace Computer, and Circon - might have strengthened the poison pill in Delaware and solidified the Just Say No defense in ways that eliminated Delaware's distinctiveness as a takeover-friendly jurisdiction. Second, exogenous trends, 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.

Number of Pages in PDF File: 41

Keywords: Delaware, Takeovers, Mergers & Acquisitions

JEL Classification: G30, G34, K22

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Date posted: December 14, 2002  

Suggested Citation

Subramanian, Guhan, The Disappearing Delaware Effect (October 2002). Harvard Law and Economics Discussion Paper No. 391. Available at SSRN: http://ssrn.com/abstract=345040 or http://dx.doi.org/10.2139/ssrn.345040

Contact Information

Guhan Subramanian (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-9784 (Phone)
617-496-7379 (Fax)
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