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Delaware's Compensation

Michal Barzuza

University of Virginia School of Law

May 2008

Virginia Law Review, Vol. 94, No. 3, p. 521, 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.

Number of Pages in PDF File: 53

Keywords: Delaware, Corporate law, Franchise tax, Regulatory competition

JEL Classification: G30, G34, K22, H20, K34

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Date posted: June 26, 2008  

Suggested Citation

Barzuza, Michal, Delaware's Compensation (May 2008). Virginia Law Review, Vol. 94, No. 3, p. 521, May 2008. Available at SSRN: https://ssrn.com/abstract=1148695

Contact Information

Michal Barzuza (Contact Author)
University of Virginia School of Law ( email )
580 Massie Road
Charlottesville, VA 22903
United States

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