Law Commons^™

Corporate Policy And The Coherence Of Delaware Takeover Law, Richard E. Kihlstrom, Michael L. Wachter

All Faculty Scholarship

This Article presents a model that can be used to explain key elements of Delaware takeover law. By incorporating corporate policy as a key variable in the model, Delaware law’s management discretion rule can be shown to be best suited for maximizing the value of the corporation and the shareholders’ interest under a set of reasonable assumptions. By allowing for occasional market mispricing and the agency costs associated with managing to the market, we demonstrate that a shareholder choice regime would likely lead to suboptimal investment decisions. In our model, managers are assumed to have better information regarding alternative corporate …