Advantages of competition for corporate charters l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 12

Advantages of Competition for Corporate Charters PowerPoint PPT Presentation


  • 110 Views
  • Uploaded on
  • Presentation posted in: General

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.

Download Presentation

Advantages of Competition for Corporate Charters

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 l.jpg

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 l.jpg

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 l.jpg

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 l.jpg

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 l.jpg

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


Reincorporation event studies l.jpg

Reincorporation Event Studies


Selected takeover statute event studies multiple statutes l.jpg

Selected Takeover Statute Event Studies: Multiple Statutes


Selected takeover statute event studies business combination statutes l.jpg

Selected Takeover Statute Event Studies: Business Combination Statutes


Effects of domicile differences on antitakeover protection l.jpg

Effects of Domicile differences on Antitakeover Protection


Issues for competition in the eu raised by ecj s rejection of real seat rule l.jpg

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 l.jpg

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 l.jpg

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


  • Login