Although empirical scholarship dominates the field of law and finance, much of it shares a common vulnerability: an abiding faith in the accuracy and integrity of a small, specialized collection of corporate governance data. In this paper, we unveil a novel collection of three decades’ worth of corporate charters for thousands of public companies, which shows that this faith is misplaced.
We make three principal contributions to the literature. First, we label our corpus for a variety of firm- and state-level governance features. Doing so reveals significant infirmities within the most well-known corporate governance datasets, including an error rate exceeding eighty percent in the G-Index, the most widely used proxy for “good governance” in law and finance. Correcting these errors substantially weakens one of the most well-known results in law and finance, which associates good governance with higher investment returns. Second, we make our corpus freely available to others, in hope of providing a long-overdue resource for traditional scholars as well as those exploring new frontiers in corporate governance, ranging from machine learning to stakeholder governance to the effects of common ownership. Third, and more broadly, our analysis exposes twin cautionary tales about the critical role of lawyers in empirical research, and the dubious practice of throttling public access to public records.
Eric Talley is an expert in the intersection of corporate law, governance, and finance. He also teaches and researches in the areas of mergers and acquisitions, quantitative methods, machine learning, contract and commercial law, alternative investments, game theory, and economic analysis of law.
As a co-director of the Ira M. Millstein Center for Global Markets and Corporate Ownership, Talley shapes research and programs focused on the future of corporate governance and performance. Talley is a frequent commentator in the national media, and he speaks regularly to corporate boards, judges and regulators on issues pertaining to fiduciary duties, governance, and finance. He is the host of the Columbia-based podcast, Beyond "Unprecedented": The Post Pandemic Economy.
Before joining Columbia Law in 2015, Talley held permanent or visiting appointments at the University of California at Berkeley, University of Southern California, Caltech, University of Chicago, Harvard University, Georgetown University, RAND Graduate School, and Stanford University. In 2017, Talley was chosen by Columbia Law School’s graduating class to receive the Willis L.M. Reese Prize for Excellence in Teaching.
He is the Immediate Past Chair of the board of directors of the Society for Empirical Legal Studies and was the co-president of the 2014 Conference on Empirical Legal Studies.