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Event Studies and the Law: Part II--Empirical Studies and Corporate Law
Sanjai Bhagat, Leeds School of Business
Roberta Romano, Yale Law School, Yale International Center for Finance and NBER
ABSTRACT:
This paper is the second part of a review of the event study methodology, which has
proved to be one of the most successful uses of econometrics in policy analysis. In this part we
focus on the methodology’s application to corporate law and corporate governance issues. Event
studies have played an important role in the making of corporate law and in corporate law
scholarship. The reason for this input is twofold. First, there is a match between the
methodology and subject matter: the goal of corporate law is to increase shareholder wealth and
event studies provide a metric for measurement of the impact upon stock prices of policy
decisions. Second, because the participants in corporate law debates share the objective of
corporate law, to adopt policies that enhance shareholder wealth, their disagreements are over the
means to achieve that end. Hence, the discourse can be empirically informed. The paper
concludes by sketching the methodology’s use in evaluating the economic effects of
regulation. While event studies’ usefulness for policy analysis is by now familiar in the corporate
law setting, we hope that our two-part review will suggest appropriate applications to other fields
of law.
SUGGESTED CITATION:
Sanjai Bhagat and Roberta Romano,
"Event Studies and the Law: Part II--Empirical Studies and Corporate Law"
(May 9, 2001).
Yale Law School.
Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series.
Paper 260.
http://lsr.nellco.org/yale/lepp/papers/260
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