TY - JOUR AU - Bebchuk,Lucian AU - Cohen,Alma AU - Ferrell,Allen TI - Does the Evidence Favor State Competition in Corporate Law? JF - National Bureau of Economic Research Working Paper Series VL - No. 9380 PY - 2002 Y2 - December 2002 UR - http://www.nber.org/papers/w9380 L1 - http://www.nber.org/papers/w9380.pdf N1 - Author contact info: Lucian A. Bebchuk Harvard Law School 1545 Massachusetts Avenue Cambridge, MA 02138 Tel: 617/495-3138 Fax: 617/812-0554 E-Mail: bebchuk@law.harvard.edu Alma Cohen The Eitan Berglas School of Economics Tel Aviv University Ramat-Aviv, Tel-Aviv ISRAEL Tel: 011-972-3-640-993 E-Mail: almac@post.tau.ac.il Allen Ferrell Law School Harvard University E-Mail: fferrell@law.harvard.edu AB - In the ongoing debate on state competition over corporate charters, supporters of state competition have long claimed that the empirical evidence clearly supports their view. This paper suggests that the body of empirical evidence on which supporters of state competition have relied does not warrant this claim. The paper first demonstrates that reported findings of a positive correlation between incorporation in Delaware and increased shareholder wealth are not robust and, furthermore, do not establish causation. The paper then shows that, even if Delaware incorporation were found to cause an increase in shareholder value, this finding would not imply that state competition is working well; benefits to incorporating in the dominant state would likely exist in a race-toward-the bottom' equilibrium in which state competition provided undesirable incentives. Third, the analysis shows that empirical claims that state competition rewards moderation in the provision of antitakeover protections are not well grounded. Finally, we endorse a new approach to the empirical study of the subject that is based on analyzing the determinants of companies' choices of state of incorporation. Recent work based on this approach indicates that, contrary to the beliefs of state competition supporters, states that amass antitakeover statutes are more successful in the incorporation market. ER -