Fee-Shifting Bylaws: An Empirical Analysis

27 Pages Posted: 3 Feb 2020

See all articles by Jens Dammann

Jens Dammann

University of Texas at Austin - School of Law; European Corporate Governance Institute (ECGI)

Date Written: February 3, 2020


Shareholder litigation has long played a central but highly controversial role in American corporate governance. In 2014, the Delaware Supreme Court took a step that had the potential to reduce the amount of such litigation dramatically. In its landmark ATP Tour, Inc. v. Deutscher Tennis Bund (“ATP”) decision, the Court embraced the legality of so-called fee-shifting bylaws. Such bylaws typically require plaintiff shareholders to bear a corporation’s litigation expenses if their suit does not succeed on the merits. Only a year later, however, the Delaware legislature overruled ATP by adopting legislation banning fee-shifting provisions.

From a policy perspective, the crucial question is whether this prohibition benefits shareholders? Many scholars have weighed in on the policy issue. But, to date, no empirical study has examined the ATP decision’s impact on shareholder wealth. The present article fills this gap. Using a hand-collected data set on fee-shifting provisions, I show that the legalization of fee-shifting bylaws reduced shareholder wealth.

Keywords: Fee-Shifting

Suggested Citation

Dammann, Jens, Fee-Shifting Bylaws: An Empirical Analysis (February 3, 2020). Available at SSRN: https://ssrn.com/abstract=3514971 or http://dx.doi.org/10.2139/ssrn.3514971

Jens Dammann (Contact Author)

University of Texas at Austin - School of Law ( email )

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United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels

HOME PAGE: http://https://ecgi.global/users/jens-dammann

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