The Disappearing Delaware Effect

41 Pages Posted: 14 Dec 2002

Multiple version iconThere are 3 versions of this paper

Date Written: October 2002


Refining and extending the methodology introduced by Daines (2001), I present evidence that firms incorporated in Delaware were worth 2-3% more than non-Delaware firms during the period 1991-1996, but not significantly more after 1996. I present two potential explanations for this "disappearing" Delaware effect. First, three takeover contests from the mid-1990s - Younkers, Wallace Computer, and Circon - might have strengthened the poison pill in Delaware and solidified the Just Say No defense in ways that eliminated Delaware's distinctiveness as a takeover-friendly jurisdiction. Second, exogenous trends, notably the increase in stock compensation during the 1990s, might have made takeover law no longer a binding constraint in many M&A transactions. I find some support in the empirical evidence for both of these explanations.

Keywords: Delaware, Takeovers, Mergers & Acquisitions

JEL Classification: G30, G34, K22

Suggested Citation

Subramanian, Guhan, The Disappearing Delaware Effect (October 2002). Available at SSRN: or

Guhan Subramanian (Contact Author)

Harvard Business School ( email )

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