Event Studies and the Law: Part II: Empirical Studies of Corporate Law

This article is the second part of a review of the event studymethodology, which has proved to be one of the most successfuluses of econometrics in policy analysis. In this part we focuson the methodology's application to corporate law and corporategovernance issues. Event studies have played an important rolein the making of corporate law and in corporate law scholarship.The reason for this input is twofold. First, there is a matchbetween the methodology and subject matter: the goal of corporatelaw is to increase shareholder wealth, and event studies providea metric for measurement of the impact upon stock prices ofpolicy decisions. Second, because the participants in corporatelaw debates share the objective of corporate law, to adopt policiesthat enhance shareholder wealth, their disagreements are overthe means to achieve that end. Hence, the discourse can be empiricallyinformed. The article concludes by sketching the methodology'suse in evaluating the economic effects of regulation. Whileevent studies' usefulness for policy analysis is by now familiarin the corporate law setting, we hope that our two-part reviewwill suggest appropriate applications to other fields of law.