53 Pages Posted: 26 Jun 2008
Date Written: May 2008
This Article illuminates the interdependence between the structure of Delaware's franchise tax and Delaware's corporate law. It makes three major arguments. First, different franchise tax structures would create different regulatory incentives for Delaware. Second, the current structure of Delaware's franchise tax law is suboptimal. A franchise tax that is sensitive to firm performance would be superior to Delaware's current franchise tax. It would align Delaware's incentives with those of shareholders and induce it to offer corporate law that maximizes shareholder value. It will have this effect even if Delaware faces no competition from other states over incorporations and even if shareholders are passive. Third, Delaware may not have sufficient incentives to reform its franchise tax law. The Article derives policy implications.
Keywords: Delaware, Corporate law, Franchise tax, Regulatory competition
JEL Classification: G30, G34, K22, H20, K34
Suggested Citation: Suggested Citation