advantages of competition for corporate charters
Download
Skip this Video
Download Presentation
Advantages of Competition for Corporate Charters

Loading in 2 Seconds...

play fullscreen
1 / 12

Advantages of Competition for Corporate Charters - PowerPoint PPT Presentation


  • 131 Views
  • Uploaded on

Advantages of Competition for Corporate Charters. Roberta Romano Yale Law School and National Bureau of Economic Research Yale Law School International Symposium on: Assessing Corporate Law Reform in the Transatlantic Context Paris, October 21, 2003. Benefits of Competition.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Advantages of Competition for Corporate Charters' - travis


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
advantages of competition for corporate charters

Advantages of Competition for Corporate Charters

Roberta Romano

Yale Law School and National Bureau of Economic Research

Yale Law School International Symposium on:

Assessing Corporate Law Reform in the Transatlantic Context

Paris, October 21, 2003

benefits of competition
Benefits of Competition
  • Improved incentives for promoters
  • Improved incentives for regulators
  • Innovation and experimentation
  • Bottom-up vs. top-down harmonization
how does the u s corporate charter market work
How does the U.S. corporate charter market work?
  • Firms choose a statutory domicile from among 50 states and District of Columbia
  • Statutes are enabling
  • Substantial uniformity in content: significant reforms diffuse across states
  • Delaware is the dominant choice of public corporations
reasons for delaware s success
Reasons for Delaware’s success
  • Responsive to corporate concerns (first or second in corporate law reform)
  • Credible commitment to be responsive: 17% of total tax revenues from franchise fees
  • Investment in corporate-law specific assets (legal capital)
  • Constitutional requirement of supermajority to amend corporation code
is the race to the bottom or the top
Is the race to the bottom or the top?
  • Evidence toward the top
    • Event studies report positive price effects on change in domicile
    • Higher Tobin’s Q for Delaware firms (Daines 2001)
  • Evidence toward the bottom
    • Event studies of takeover statutes report negative price effects
    • Successful states have takeover statutes but Delaware is the exception
  • Conclusion: on balance, shareholders have benefited from competition
issues for competition in the eu raised by ecj s rejection of real seat rule
Issues for Competition in the EU (raised by ECJ’s rejection of real seat rule)
  • Development of incentives for nation states
    • Franchise fees
    • Competition among organizational forms
    • Tax on cross-border domicile changes
    • Concentrated ownership structures
  • Harmonization impetus
    • Potential for changes in company law
    • Nonshareholder wealth- maximizing objectives in company laws
e u company law directives compared to u s corporate codes
E.U. Company Law Directives compared to U.S. Corporate Codes
  • Of 131 directive provisions, 95 in no U.S. states; 14 in all 50 states; rest random
  • Higher mandatory content in directives (e.g. minimum capital)
  • Rules long eliminated in U.S. (e.g. legal capital rules on distributions, par value)

(Source: Carney 1996)

conclusion
Conclusion
  • State competition produces innovative, responsive corporation codes
  • Best available evidence indicates that the product, for the most part, benefits investors
    • Race is to the top but non-linear (takeover statutes)
    • Short-run deviations face self-correcting pressure from competition, which would be absent in non-competitive context
  • Expected changes in EU company laws (on some dimensions may come closer to US codes) in absence of harmonization efforts, should benefit shareholders
ad