IDEAS home Printed from
   My bibliography  Save this article

An Empirical Analysis of the Reincorporation Decision


  • Heron, Randall A.
  • Lewellen, Wilbur G.


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, we examine a large sample of firms that changed their state of incorporation over the period 1980–1992. We find 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, in fact, expand the outside representation on their boards, whereas firms citing other motives do not.

Suggested Citation

  • Heron, Randall A. & Lewellen, Wilbur G., 1998. "An Empirical Analysis of the Reincorporation Decision," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(04), pages 549-568, December.
  • Handle: RePEc:cup:jfinqa:v:33:y:1998:i:04:p:549-568_00

    Download full text from publisher

    File URL:
    File Function: link to article abstract page
    Download Restriction: no

    References listed on IDEAS

    1. Alziary, Benedicte & Decamps, Jean-Paul & Koehl, Pierre-Francois, 1997. "A P.D.E. approach to Asian options: analytical and numerical evidence," Journal of Banking & Finance, Elsevier, vol. 21(5), pages 613-640, May.
    2. De Schepper, A. & Teunen, M. & Goovaerts, M., 1994. "An analytical inversion of a Laplace transform related to annuities certain," Insurance: Mathematics and Economics, Elsevier, vol. 14(1), pages 33-37, April.
    3. J. A. Nielsen & K. Sandmann, 1996. "The pricing of Asian options under stochastic interest rates," Applied Mathematical Finance, Taylor & Francis Journals, vol. 3(3), pages 209-236.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Yaxuan Qi & John Wald, 2008. "State Laws and Debt Covenants," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 179-207, February.
    2. Sattar A. Mansi & William F. Maxwell & John K. Wald, 2009. "Creditor Protection Laws and the Cost of Debt," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 701-717, November.
    3. Bebchuk, Lucian Arye & Cohen, Alma, 2003. "Firms' Decisions Where to Incorporate," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 383-425, October.
    4. Jagannathan, Murali & Pritchard, A.C., 2017. "Do Delaware CEOs get fired?," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 85-101.
    5. Daines, Robert, 2001. "Does Delaware law improve firm value?," Journal of Financial Economics, Elsevier, vol. 62(3), pages 525-558, December.
    6. Bradley, Michael & Chen, Dong, 2011. "Corporate governance and the cost of debt: Evidence from director limited liability and indemnification provisions," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 83-107, February.
    7. Aguir, Iness & Burns, Natasha & Mansi, Sattar A. & Wald, John K., 2014. "Liability protection, director compensation, and incentives," Journal of Financial Intermediation, Elsevier, vol. 23(4), pages 570-589.
    8. Colonnello, Stefano & Herpfer, Christoph, 2016. "Do courts matter for firm value? Evidence from the U.S. court system," IWH Discussion Papers 1/2016, Halle Institute for Economic Research (IWH).
    9. repec:bla:jomstd:v:54:y:2017:i:8:p:1241-1270 is not listed on IDEAS
    10. Bebchuk, Lucian Arye & Cohen, Alma, 2002. "Firms' Decisions on Where to Incorporate," CEPR Discussion Papers 3514, C.E.P.R. Discussion Papers.
    11. Wald, John K. & Long, Michael S., 2007. "The effect of state laws on capital structure," Journal of Financial Economics, Elsevier, vol. 83(2), pages 297-319, February.
    12. Karpov, A., 2012. "Corporate Board Elections and Company's Performance," Journal of the New Economic Association, New Economic Association, vol. 16(4), pages 10-25.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:33:y:1998:i:04:p:549-568_00. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.