Journal article
Disloyal Managers and Shareholders' Wealth
The Review of financial studies, v 36(5), pp 1837-1888
20 Apr 2023
Abstract
A duty of loyalty prohibits fiduciaries from appropriating business opportunities from their companies. Starting in 2000, Delaware, followed by several other states, allowed boards to waive their duty. We show that public firms covered by waiver laws invest less in R&D, produce fewer and less valuable patents, and exhibit abnormally high inventor departures. Remaining innovation activities contribute less to firm value, a fact confirmed by the market reaction when firms reveal their curtailed internal growth opportunities by announcing acquisitions. Consistent with the laws' intent to provide contracting flexibility to emerging firms, we find evidence of positive impacts for small firms.
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Details
- Title
- Disloyal Managers and Shareholders' Wealth
- Creators
- Eliezer M. Fich (Corresponding Author) - Drexel UniversityJarrad Harford - University of WashingtonAnh L. Tran - City, University of London
- Publication Details
- The Review of financial studies, v 36(5), pp 1837-1888
- Publisher
- Oxford University Press
- Number of pages
- 52
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:000877960400001
- Scopus ID
- 2-s2.0-85160235835
- Other Identifier
- 991020542328604721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics