Corporate Opportunity Waiver Laws Did Not Produce Disloyal Managers
Corporate Opportunity Waiver (COW) laws permit firms to suspend fiduciary duties related to corporate opportunities. Fich, Harford, and Tran (2023) argue that these laws reduced firm innovation and lowered corporate valuation for research-intensive firms. However, we find that over 90% of the regressions we re-examine are non-replicable using correct samples and specifications. We further show that the reported decline in Tobin’s q is confounded by the effects of the dot-com bubble burst. Moreover, public firms subject to COWs reduce takeover defenses, contradicting their argument that COW laws weaken corporate governance. Overall, their conclusion that COW laws foster managerial disloyalty and harm shareholder value is not supported by the data.
This paper received a response:
Fich, E.M., J. Harford, and A.L. Tran. 2026. Replication Guidance for “Disloyal Managers and Shareholder Wealth”. I4R Discussion Paper Series No. 286. Institute for Replication.
JEL-Klassifikation: G34, G38, O34