Extended Abstract 

Over the past three decades, the corporate governance landscape has undergone a seismic transformation. Institutional ownership has concentrated equity in the hands of a relatively small number of powerful investors, fundamentally altering the dynamics of shareholder voting and oversight. At the same time, hedge fund activism has emerged as a disruptive force, reshaping corporate decision-making and driving significant changes in merger negotiations. And Delaware courts—the epicenter of American corporate law—have shifted their doctrines, increasingly deferring to shareholder approval as a mechanism for cleansing conflicts in merger transactions. Meanwhile, the rise of passive investing through index funds and ETFs has raised new concerns about the incentives and influence of large, diversified asset managers.

These changes raise fundamental questions about how different institutional tools are used to protect shareholders’ interests. This project focuses on four primary mechanisms: (1) shareholder litigation; (2) the shareholder vote; (3) institutional investors monitoring corporate management, including through hedge fund activism; and (4) the role of independent directors on the board. How do these tools interact to safeguard shareholder interests? How effective are they in mitigating the inherent disadvantages public shareholders face, including limited ability to make counteroffers? And how have these mechanisms evolved in response to the shifting corporate governance environment? The current understanding of these broad questions among scholars and practitioners stems from a blend of conventional wisdom, theoretical reasoning, and a fragmented empirical literature in which each paper generally focuses narrowly on only specific aspects of the corporate governance puzzle. In this paper, I advance a more systematic and comprehensive descriptive account by leveraging large language models (LLMs) to construct novel datasets, offering a deeper and more nuanced view of the mechanisms protecting target shareholders. 

To do we focus on a class of corporate transactions that is both of first-order economic importance and raises a host of shareholder protection concerns: mergers and acquisitions.  First, we construct a comprehensive dataset on the population of public company acquisitions from 1996 to 2023 by using LLMs to code details disclosed in public securities filings about these mergers, including the sale and negotiation processes. This dataset captures critical aspects of deal-making that have often been overlooked in prior empirical studies. Second, we use LLMs to code details of litigation filed about these mergers, starting from dockets (where available) through to judicial opinions, with a focus on Delaware litigation, where much of U.S. corporate law is developed. This allows for a systematic analysis of how courts have responded to evolving governance practices. Third, we combine these newly created datasets with existing data on shareholder votes on these transactions, hedge fund activist engagements, stock prices, and patterns of corporate ownership.

This multi-faceted, comprehensive approach enables a more integrated understanding of the governance ecosystem surrounding mergers and acquisitions and how it has evolved in response to key trends. By examining how these four mechanisms have evolved in tandem and responded to broader changes in the corporate governance environment, this Article provides new insights into how institutional tools collectively shape corporate control and shareholder protections over time.

Practicalities

This event will be a hybrid event. The seminar will take place in Roeterseiland campus (REC) building A, room number A3.01, and will also be streamed online via Zoom.  

About the speaker 

Ryan Bubb joined the NYU School of Law faculty in 2010. He was formerly a senior researcher for the Financial Crisis Inquiry Commission and a policy analyst at the Office of Information and Regulatory Affairs at the Office of Management and Budget. He earned a JD from Yale Law School and a PhD in political economy and government from Harvard University. Bubb’s research focuses on law and economics, corporate law, financial institutions, and regulatory policy.

About ACLE

The Amsterdam Center for Law and Economics (ACLE) is a joint initiative of the Faculty of Economics and Business and the Faculty of Law at the University of Amsterdam. The objective of the ACLE is to promote high-quality interdisciplinary research at the intersection between law and economics.