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Can Lax Corporate Law Increase Shareholder Value? Evidence from Nevada

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  • Ofer Eldar

Abstract

Recent scholarship argues that Nevada's lax corporate law, which exempts managers from fiduciary duties and discourages takeovers, may harm shareholders' wealth. I present evidence that Nevada corporate law does not harm shareholder value for firms that self-select into Nevada, particularly small firms with low levels of institutional shareholding and high levels of insider ownership, and it may in fact enhance the value of these firms. A possible explanation is that Nevada's promanagerial laws reduce the likelihood of takeovers and litigation, thereby benefiting a segment of small firms for which the costs of corporate governance may outweigh the benefits.

Suggested Citation

  • Ofer Eldar, 2018. "Can Lax Corporate Law Increase Shareholder Value? Evidence from Nevada," Journal of Law and Economics, University of Chicago Press, vol. 61(4), pages 555-605.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/700214
    DOI: 10.1086/700214
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    Cited by:

    1. Bian, Bo & Li, Yingxiang & Nigro, Casimiro A., 2022. "Conflicting fiduciary duties and fire sales of VC-backed start-ups," LawFin Working Paper Series 35, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    2. Sarfraz Khan & Sung‐Jin Park & Stanley Veliotis & John K. Wald, 2023. "Director and officer liability and corporate tax avoidance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(7-8), pages 1338-1371, July.

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