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Does Charter Competition Foster Entrepreneurship? A Difference-in-Difference Approach to European Company Law Reforms

40 Pages Posted: 27 Jan 2012  

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Horst Eidenmueller

University of Oxford; European Corporate Governance Institute (ECGI)

Andreas Engert

University of Mannheim

Reiner Braun

Technische Universität München (TUM) - TUM School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2011

Abstract

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.

Keywords: entrepreneurship, regulatory competition, charter competition, corporate mobility

JEL Classification: G38, K22

Suggested Citation

Hornuf, Lars and Eidenmueller, Horst and Engert, Andreas and Braun, Reiner, Does Charter Competition Foster Entrepreneurship? A Difference-in-Difference Approach to European Company Law Reforms (May 1, 2011). ECGI - Finance Working Paper No. 308/2011. Available at SSRN: https://ssrn.com/abstract=1990189 or http://dx.doi.org/10.2139/ssrn.1990189

Lars Hornuf (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, 80539
Germany

Horst G. M. Eidenmueller

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Andreas Engert

University of Mannheim ( email )

Schloss Westflügel
68131 Mannheim, 68131
Germany

HOME PAGE: http://engert.info

Reiner Braun

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, Deutschland 80333
Germany
+498928925181 (Phone)
+498928925188 (Fax)

HOME PAGE: http://www.ef.wi.tum.de/

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