Empirical Legal Studies

Tips for More Readable Graphs

Over at Andrew Gelman's blog, John Kastellec (Princeton--Poli Sci) ignited a discussion (here) about "common but easily avoidable graphical mistakes" that hinder graphs' readability. While some suggestions are obvious, others are not. As well, the comments to John's post are as important and helpful as the post itself. When all is said and done, however, for my money the most important contribution to this topic remains Tufte's classic: The Visual Display of Quantitative Information (2nd ed.).

"georoute"--Measuring Distance and Time Between Two Points

While requiring a user-download, a new--albeit quirky--command, "georoute", allows researchers to compute "travel distance and travel time between two points defined by their addresses or their geographical coordinates." Or, more specifically:

"calculates the georouting distance between two addresses or two geographical points identified by their coordinates. It uses the HERE API (https://developer.here.com) to retrieve distances in two steps. In the first step, addresses are geocoded and their geographical coordinates (latitude and longitude) are obtained. In the second step, the georouting distance between the two points is obtained. The user can also provide directly geographical coordinates, which will bypass the first step."

Such a program may prove useful, e.g., to researchers exploring various "access to justice" research papers that seek to exploit/explore data on physical distance. A brief discussion is found here.

For those interested, to download this program, from within Stata, type: ssc install georoute

Incorporation & the "Delaware Trap"

In The Delaware Trap: An Empirical Analysis of Incorporation Decisions, Robert Anderson (Pepperdine) engages with, as he notes, "One of the most significant debates in corporate law," namely "whether the United States system of corporate law federalism leads to a race to the bottom or a race to the top. Race-to-the-bottom theorists argue that because insiders of companies must initiate incorporation decisions, jurisdictions compete to provide legal rules that favor insiders, allowing them to extract private benefits at the expense of the corporation or its shareholders. Race to-the-top theorists argue that market constraints prevent insiders from favoring such jurisdictions and that jurisdictions actually compete to provide efficient legal rules that enhance shareholder value. Although the dichotomous framing as a 'race' to the 'top' or 'bottom' is a bit of an oversimplification of a more nuanced debate, that version of the debate has dominated discussions of corporate law for decades.” And to this classic research question Anderson brings a fresh set of under-explored data: "filings made with the Securities and Exchange Commission under Regulation D. Regulation D is probably the most commonly used exemption from the Securities Act of 1933; it is used for private capital-raising and is relied on by over 10,000 public and private companies each year.”

Anderson's findings emphasize "“demographic markers of sophistication, such as choice of law firm and headquarters location, predict the jurisdictional choice about as well as state law or the business attributes of companies. Companies with more demographic markers of sophistication tend to choose Delaware incorporation, and companies with fewer demographic markers of sophistication tend to choose home-state incorporation.” And these findings persist after including many of the obvious controls.

Anderson interprets these results to imply that "the choice of legal representation is an important missing variable in models of incorporation decisions. The fact that the choice of law firms drives the jurisdictional choice has far broader implications. If law firms drive the jurisdictional choice they may steer companies toward states that serve the law firms’ own interests without regard to the quality of legal rules or the needs of the client. When the state chosen is Delaware, as it often is, there are few alternative jurisdictions that shareholders and managers can agree on. As a result, companies inadvertently fall into a 'governance trap' from which reincorporation out of state is nearly impossible. This interpretation would suggest that Delaware’s carefully calibrated positioning in the charter market has largely eliminated meaningful competition among the states for the quality of corporate law."