The Private Ordering Solution to Multiforum Shareholder Litigation

Roberta Romano (Yale Law School)
Sarath Sanga (University of California, Berkeley Law School)

Abstract: This paper analyzes a private ordering solution to multiforum shareholder litigation: exclusive forum provisions. Using hand-collected data on the 746 U.S. public corporations that have adopted the provision, we find by 2014, nearly all Delaware IPOs have the provision, and the transition from zero to near-universal adoption is driven by law firms. For post-IPO adoptions, we find there are either no significant differences or that adopters have higher quality governance than non-adopters, which is inconsistent with managerial opportunism and there are no significant differences in governance and ownership structures across firms adopting by board or by shareholders, suggesting that the adoption method should not be a matter of concern for investors.

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