Does Charter Competition Foster Entrepreneurship? A Difference‐In‐Difference Approach to European Company Law Reforms

17 Pages Posted: 28 Mar 2013

See all articles by Horst Eidenmueller

Horst Eidenmueller

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Andreas Engert

Freie Universität Berlin, Department of Law; European Corporate Governance Institute (ECGI)

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)

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Date Written: May 2013

Abstract

This article explores 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 United Kingdom private company limited by shares has posed a competitive threat to many European legislators. The article analyzes 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, a strong impact is recorded in both respects, especially if the minimum capital requirement was reduced or abolished.

Suggested Citation

Eidenmueller, Horst G. M. and Engert, Andreas and Hornuf, Lars, Does Charter Competition Foster Entrepreneurship? A Difference‐In‐Difference Approach to European Company Law Reforms (May 2013). JCMS: Journal of Common Market Studies, Vol. 51, Issue 3, pp. 399-415, 2013, Available at SSRN: https://ssrn.com/abstract=2240784 or http://dx.doi.org/10.1111/jcms.12003

Horst G. M. Eidenmueller

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Andreas Engert

Freie Universität Berlin, Department of Law ( email )

Boltzmannstr. 3
Berlin, 14195
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Lars Hornuf

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 ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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

Poschinger Str. 5
Munich, DE-81679
Germany

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