Tuesday, January 15, 2019 - 4:10pm to 5:45pm
Location: 
Room 219, Flavelle Building, 78 Queen's Park

LAW & ECONOMICS COLLOQUIUM

presents

Sarath Sanga
Northwestern University Pritzker School of Law

Network Effects in Corporate Governance

Tuesday, January 15, 2019
4:10 - 5:45
Room FL219 (John Willis Classroom)
78 Queen's Park

Most public companies incorporate in Delaware. Is this because they prefer its legal system or are they simply following a trend? Using the incorporation histories of over 22,000 public companies from 1930 to 2010, I show that firms are more influenced by
changes in each other’s decisions than by changes in the law. The analysis exploits an unexpected legal shock that increased Delaware’s long-run share from 30 to 74 percent. I attribute most of this change to a cascading effect in which the decisions of past firms successively influence future cohorts. Delaware firms also enjoyed abnormal returns precisely during those years in which the Delaware network grew most. I conclude that network effects dominate secular trends in corporate governance.

Sarath Sanga studies business organizations and contract law. He has also published on the law and economics of crime and racial profiling. His work has appeared in leading peer review and law review journals, including the Journal of Political Economy, Journal of Law, Economics, & Organization, American Law and Economics Review, the Journal of Empirical Legal Studies, and California Law Review. Sanga holds a BA in economics from the University of Michigan, Ann Arbor, a PhD in economics from the University of California, Berkeley, and a JD from Yale.

 

For more workshop information, please send an email to events.law@utoronto.ca.