Event Studies and the Law: Part II - Empirical Studies of
Corporate Law

39 Pages Posted: 9 May 2001  

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

Roberta Romano

Yale Law School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: April 2001

Abstract

This paper is the second part of a review of the event study methodology, which has proved to be one of the most successful uses of econometrics in policy analysis. In this part we focus on the methodology's application to corporate law and corporate governance issues. Event studies have played an important role in the making of corporate law and in corporate law scholarship. The reason for this input is twofold. First, there is a match between the methodology and subject matter: the goal of corporate law is to increase shareholder wealth and event studies provide a metric for measurement of the impact upon stock prices of policy decisions. Second, because the participants in corporate law debates share the objective of corporate law, to adopt policies that enhance shareholder wealth, their disagreements are over the means to achieve that end. Hence, the discourse can be empirically informed. The paper concludes by sketching the methodology's use in evaluating the economic effects of regulation. While event studies' usefulness for policy analysis is now familiar in the corporate law setting, we hope that our two-part review will suggest appropriate applications to other fields of law.

JEL Classification: G140, G300, K220

Suggested Citation

Bhagat, Sanjai and Romano, Roberta, Event Studies and the Law: Part II - Empirical Studies of Corporate Law (April 2001). Yale ICF Working Paper No. 00-33; Yale Law & Economics Research Paper No. 260. Available at SSRN: https://ssrn.com/abstract=268285 or http://dx.doi.org/10.2139/ssrn.268285

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

Roberta Romano (Contact Author)

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-4965 (Phone)
203-432-4871 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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