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78 Vand. L. Rev. 1 (2025)

handle is hein.journals/vanlr78 and id is 1 raw text is: VANDERBILT LAW REVIEW VOLUME 78 JANUARY 2025 NUMBER 1 ARTICLES On Entityness and Takeovers: Acquisition Valuation, Theory of the Firm, and Coase's Error Robert J. Rhee* This Article advances a theory of entityness that theorizes the firm and its relationship to the acquisition premium. This theory is the first scholarly analysis to construct a general model of takeover valuation by integrating the modern finance theory of asset value and a corrected Coasean theory of the firm. The acquisition premium is an enigma. Acquirers must pay it. But why? Isn't the market price tethered to fundamental value through an efficient market? This enigma reveals a key insight about firms. The theory of entityness postulates that the acquisition premium is compensation for a capitalized asset intrinsic in the firm structure. This Article's core idea is that Coasean transaction cost incurred in firm creation is not really a cost as Coase and economists assert and have long believed as axiomatic. They are wrong. * John H. and Mary Lou Dasburg Professor of Law, University of Florida Levin College of Law. This Article was presented at the University of Florida's Business, Economics, and Law Interdisciplinary Colloquium in 2023, the 2023 Canadian Law & Economics Association's conference held at University of Toronto Faculty of Law, the 2024 Asian Law Institute's conference held at Chulalongkorn University, the 2024 Midwestern Law & Economics Association's conference held at the University of Kansas School of Law, and the 2024 Italian Society of Law and Economics' conference held at Sapienza University of Rome, Faculty of Law. I thank participants for their helpful comments. I also thank Benjamin Johnson, Peter Molk, Jay Ritter, and Daniel Sokol for their helpful comments. 1

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