Review of Financial Studies Vol. 27 No. 12 2014
What Happens in Nevada? Self-Selecting into Lax Law
Abstract
We find that Nevada, the second most popular state for out-of-state incorporations and a state with lax corporate law, attracts firms that are 30–40% more likely to report financial results that later require restatement than firms incorporated in other states, including Delaware. Our results suggest that firms favoring protections for insiders select Nevada as a corporate home, and these firms are prone to financial reporting failures. We provide some evidence that Nevada law also has a causal impact by increasing a Nevada firm's propensity to misreport financials after the firm has incorporated in Nevada.
- DOI
- 10.1093/rfs/hhu058
- Volume
- 27
- Issue
- 12
- Pages
- 3593-3627
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref