Corporate Opportunity Waiver Laws Did Not Produce Disloyal Managers

Heng Geng, Harald Hau and Pengfei Liu
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Heng Geng: Victoria University of Wellington
Pengfei Liu: University of Auckland

No 25-67, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Corporate Opportunity Waiver (COW) laws permit firms to suspend fiduciary duties related to corporate opportunities. Fich, Harford, and Tran (2023) argue that these laws reduced firm innovation and lowered corporate valuation for research-intensive firms. However, we are unable to replicate these results. We further show that the reported decline in Tobin's q is confounded by the effects of the dot-com bubble burst. Moreover, public firms subject to COWs reduce takeover defenses, contradicting their argument that COW laws weaken corporate governance. Overall, their conclusion that COW laws foster managerial disloyalty and harm shareholder value is not supported by the data.

Keywords: COW laws; fiduciary duties; shareholder value; innovation (search for similar items in EconPapers)
JEL-codes: G34 G38 O34 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2025-07
New Economics Papers: this item is included in nep-cfn and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2567

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