TX vs NV deep-dive memo — correction memo

SMU Corporate Governance Initiative · The Reincorporation Tracker · v6-rev75 · 2026-05-23

What replicated cleanly

The auditor confirmed the equal-weighted arithmetic and the basic non-parametric tests:

• Final TX/NV sample: 44 firms (19 TX / 25 NV) after excluding Galecto, NL Industries, Forian (non-TX/NV destinations from the broader 47-firm deep-dive file). Confirmed.
• TX equal-weighted mean Day-0 AR: −0.9905%. Confirmed.
• NV equal-weighted mean Day-0 AR: +0.4378%. Confirmed.
• Raw TX−NV difference: −1.4283 pp. Confirmed.
• Welch t-test p-value: 0.0942. Confirmed.
• Permutation-test p-value: 0.1086 (memo reported 0.1112 — close, within Monte-Carlo error). Confirmed.
• Controlled-subsample comparison p-value: 0.2565. Confirmed.
• TX total market cap: $2,220,693M. NV total market cap: $159,445M. Confirmed.

What did not replicate, with corrections

1. Value-weighted "Welch" — mislabeled inference, vastly different p-value

The original memo reported a value-weighted Welch test with p = 0.0006 supporting strong inference. The auditor showed that under a defensible WLS-of-AR-on-TX-dummy with market-cap weights:

• Nonrobust p-value: 0.0046 (still significant, but ~7× the memo's 0.0006).
• HC3-robust p-value: 0.2336 (no longer significant).

Correction. The value-weighted result is specification-fragile. We will not present it as a "Welch" test going forward — Welch's t-test does not natively accommodate market-cap weighting, and the memo conflated two estimators. Under HC3-robust WLS, the value-weighted difference is not statistically significant.

2. Propensity-score matching — does not replicate from the supplied input file

The memo's PSM result was −2.80 pp matched-pair difference. The auditor, running a standard logit on log market cap and sector with the supplied tx_vs_nv_regression_input.csv, obtained −3.68 pp. The paired test was still significant under the auditor's spec, but the magnitude does not match.

Correction. PSM is implementation-sensitive. We will not describe the PSM result as the "strongest evidence" until we publish: the exact logit specification, encoding of categorical sector dummies, matching algorithm (greedy / optimal / 1:1 / 1:k), caliper width, replacement rule, ties-breaking rule, bootstrap seed, and the matched-pair export. Canonical rev66+ as of May 2026.

3. Tesla coding inconsistencies

(a) Sign error. The memo at one point referenced "Tesla with a large negative AR of +0.28%". This is internally inconsistent. Per the v6-rev75 database, Tesla's Day-0 AR is +0.28% — a small positive return, not a large negative one.

(b) Controlled-status definition violation. The memo's stated rule was that "controlled" requires >30% voting power. Tesla is coded controlled = 1 with 20.3% (Elon Musk per SEC 13G). 20.3% does not satisfy the stated >30% rule. Either (i) the rule should be restated to include known-effective-control under the 13G/13D characterization, or (ii) Tesla should be recoded controlled = 0 (which alters the controlled-subsample test).

Correction. Canonical rev66+ (May 2026) carries a written controller-status protocol — what evidence we accept (13G filings, 13D filings, dual-class economic/voting splits, voting agreements, family blocks) — applied consistently across all 44 firms.

4. TX market-cap concentration claim

The memo stated Tesla + ExxonMobil constitute 99.2% of TX market cap. The auditor recomputed this share at 95.6%. The directional claim survives (TX market cap is dominated by two firms), but the precise figure was overstated.

5. TOST equivalence test — interpretation reversed

The memo interpreted TOST p = 0.2484 as evidence of practical equivalence between TX and NV. This is wrong. A TOST p-value of 0.2484 means we fail to reject the null of inequivalence within the ±2.0 pp band — it does not establish equivalence.

6. Controller-status sample coverage

Only 16 of 44 firms (36%) have verified controller status; 28 of 44 (64%) are unknown. The memo's headline "destination matters less than governance type" is not supportable with this coverage. The headline is preserved only as a hypothesis pending completion of the EDGAR controller-status audit (in progress under canonical rev66+).

Required sensitivity table (in progress, canonical rev66+)

The auditor's required sensitivity-table specification:

For each row, report: equal-weighted mean (TX / NV / diff), value-weighted (with HC3-robust SE), permutation p, OLS p (HC3-robust), N.

Revised headline

What this changes on the public site

• The cohort event-study page (cohort_event_study.html) now links to this correction memo from the JF-referee-findings card.
• The original TX_VS_NV_DEEP_DIVE_MEMO.md is preserved in the repository for transparency, prefaced with this disposition.
• The headline copy on the cohort page is reverted to the underpowered-null framing; the value-weighted "p = 0.0006" claim is removed.
• Canonical rev66+ (May 2026) is the active dataset; the full sensitivity table, revised PSM with documented design, and the EDGAR controller-status audit for the 28 unknown firms remain in progress.

Acknowledgments

This correction was made possible by the external auditor whose detailed replication caught the errors, by the Grok+Harper+Benjamin+Lucas internal team whose v6-rev75 announcement-date audit ran in parallel, and by the JF/JFE-style internal hostile referee read.