American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Regulatory Competition and the Market for Corporate Law
American Economic Journal: Microeconomics
(pp. 60–98)
Abstract
This article develops an empirical model of firms' choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a database of firm incorporation decisions from 1995 to 2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada's rise is due to the preferences of small firms. Consistent with the bonding hypothesis, our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws.Citation
Eldar, Ofer, and Lorenzo Magnolfi. 2020. "Regulatory Competition and the Market for Corporate Law." American Economic Journal: Microeconomics 12 (2): 60–98. DOI: 10.1257/mic.20180056Additional Materials
JEL Classification
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- G38 Corporate Finance and Governance: Government Policy and Regulation
- K21 Antitrust Law
- K22 Business and Securities Law
- L25 Firm Performance: Size, Diversification, and Scope
- L51 Economics of Regulation