Does Charter Competition Foster Entrepreneurship? A Difference-in-Difference Approach to European Company Law Reforms
Ludwig-Maximilians-Universität Munich; Stanford Law School
University of Munich; University of Oxford
University of Mannheim
Friedrich-Alexander-University (FAU) Erlangen-Nürnberg
May 1, 2011
ECGI - Finance Working Paper No. 308/2011
We study how company law reforms, particularly the reduction or abolition of minimum capital requirements, in various European jurisdictions affect the decision of entrepreneurs to incorporate by means of a private limited liability company (LLC). Since the landmark rulings of the European Court of Justice (ECJ) in the years 1999, 2002 and 2003, entrepreneurs in the European Union (EU) have been able to choose the country of incorporation independently of their real seat. As a result, the proliferation of the UK private company limited by shares has posed a competitive threat to many European legislators. We analyze whether the reforms adopted in Spain, France, Hungary, Germany and Poland have promoted the popularity of domestic legal forms and encouraged entrepreneurship more generally. Using a difference-in-difference approach, we record a strong impact in both respects, especially if the minimum capital requirement was reduced or abolished.
Number of Pages in PDF File: 40
Keywords: entrepreneurship, regulatory competition, charter competition, corporate mobility
JEL Classification: G38, K22working papers series
Date posted: January 27, 2012
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