Good Monitoring, Bad Monitoring

Stefano Rossi and Yaniv Grinstein ()

No 9960, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Are courts effective monitors of corporate decisions? In a controversial landmark case, the Delaware Supreme Court held directors personally liable for breaching their fiduciary duties, signaling a sharp increase in Delaware?s scrutiny over corporate decisions. In our event study, low-growth Delaware firms outperformed matched non-Delaware firms by 1% in the three day event window. In contrast, high-growth Delaware firms under-performed by 1%. Contrary to previous literature, we conclude that court decisions can have large, significant and heterogeneous effects on firm value, and that rules insulating directors from court scrutiny benefit the fastest growing sectors of the economy.

Keywords: Case law; Corporate governance; Monitoring; Regulation (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-cfn and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Good Monitoring, Bad Monitoring (2016)
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