Information from the abstract
We examine whether Delaware incorporation enhances shareholder value, leveraging the historic and wholly unexpected election of Donald Trump in 2016 as a natural experiment that sharply minimizes endogeneity concerns. This unique research design allows for a cleaner identification of the causal effect of Delaware law. We find that Delaware-incorporated firms experienced significantly more positive stock market reactions to Trump’s surprise victory, providing strong support for the ‘race to the top’ hypothesis that attributes a value premium to Delaware law. This effect translates to an average gain of $6.14 million per Delaware-incorporated firm, or a total of $7.86 billion across all Delaware firms in the sample, over the three-day window around the election. The Delaware value premium is especially pronounced when managerial ownership is higher, in line with agency theory. We also investigate Trump’s 2024 re-election and again find higher returns for Delaware firms, reinforcing our conclusion.
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Related topics: Corporate Finance and Governance · Auditing, Earnings Management, Governance · Firm Innovation and Growth
Thai researcher and institutional participation
Pattanaporn Chatjuthamard · Chulalongkorn University
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