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| Author: | Heron, R. A. Lewellen, W. G. |
| Title: | An empirical analysis of the reincorporations decision |
| Journal: | Journal of Financial and Quantitative Analysis
1998 : DEC, VOL. 33:4, p. 549-568 |
| Index terms: | Shareholders Corporate governance Liability Economic theory Rate of return USA |
| Freeterms: | Incorporation |
| Language: | eng |
| Abstract: | The literature suggests two competing explanations for reincorporations: efforts at managerial entrenchment and attempts to improve contractual efficiency. The empirical evidence to date is inconclusive. To seek further evidence, it is examined in the paper a large sample of firms that changed their state of incorporation over the period 1980-1992. It is found that shareholder wealth is decreased by reincorporations that erect takeover defenses, but is increased by reincorporations that establish limits on director liability. Firms that claim they reincorporate to limit the personal liability of their board members and thereby attract better qualified outside directors do expand the outside representation on their boards, whereas firms citing other motives do not. |
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