Michal Barzuza, David C. Smith
We find that Nevada, the second most popular state for out-of-state incorporations and a state with lax corporate law, attracts firms that are 30�40% more likely to report financial results that later require restatement than firms incorporated in other states, including Delaware. Our results suggest that firms favoring protections for insiders select Nevada as a corporate home, and these firms are prone to financial reporting failures. We provide some evidence that Nevada law also has a causal impact by increasing a Nevada firm's propensity to misreport financials after the firm has incorporated in Nevada.