University of Michigan Legal Working Paper Series
Working Papers 2003-2010
Does Delaware Entrench Management?
Abstract
Critics have charged that state competition in corporate law, which Delaware clearly dominates, leads to a “race to the bottom” promoting management entrenchment at shareholders’ expense. We present evidence here inconsistent with this hypothesis. Measures of director quality and governance mechanisms are higher in Delaware. Delaware’s directors hire higher quality CEOs and they are more likely to terminate CEOs. Tenures of Delaware directors and CEOs are both lower than their counterparts in other states. In addition, contrary to claims that anti-takeover laws promote management entrenchment, we find that states that provide the greatest anti-takeover protection – Ohio, Pennsylvania, Massachusetts, and Maryland – do not have significantly different turnover rates from California, the state that arguably offers the least anti-takeover protection.
Subject Area
Corporations, Organizations
Recommended Citation
Murali Jagannathan and Adam C. Pritchard,
"Does Delaware Entrench Management?"
(December 2008).
University of Michigan Legal Working Paper Series.
Working Papers 2003-2010.
Working Paper 93.
http://law.bepress.com/umichlwps/olin/art93
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