Robert J. Rhee is John H. and Marylou Dasburg Professor of Law at the University of Florida Levin College of Law. This post is based on his recent paper, forthcoming in the Journal of Corporation Law, and is part of the Delaware law series; links to other posts in the series are available here.
Is Delaware corporate law relevant? Relevance is a relational concept. Relevant to what? Rules of corporate law are considered in efficiency’s light. Efficient laws should enhance firm value. Is Delaware law more efficient than the laws of other states such that we should see a “Delaware premium”? Do inter-state differences in corporate law matter?
The idea of a “race” for quality has commanded the attention of scholars since the Cary–Winter debate. It is central to the question of federalism in corporate law. The advocates of Delaware law accept the view that it represents the product of a race to the top. But suppose the “race” is a figment of our theoretical imagination. Suppose there is no evidence of a Delaware valuation premium. If so, under the generally accepted measure of quality (efficiency and firm value), corporate law would be irrelevant. A much smaller camp in the academic debate has argued that corporate law is “trivial.” In The Irrelevance of Delaware Corporate Law, 48 J. Corp. L. (forthcoming 2022), I provide empirical support for the hypothesis that, despite the law’s purported aspiration for efficiency, inter-state differences in state corporate law have no basis in efficiency.