Regulatory Competition and the Market for Corporate Law

90 Pages Posted: 7 Nov 2015 Last revised: 14 Jul 2020

See all articles by Ofer Eldar

Ofer Eldar

Duke University - School of Law and Fuqua School of Business; European Corporate Governance Institute (ECGI); Duke Innovation & Entrepreneurship Initiative

Lorenzo Magnolfi

University of Wisconsin-Madison

Date Written: April 15, 2019


This article develops an empirical model of firms’ choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a database of firm incorporation decisions from 1995-2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada’s rise is due to the preferences of small firms. Consistent with the bonding hypothesis, our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws.

Keywords: Regulatory Competition, Corporate Governance, Anti-Takeover Statutes, Directors and Officers Liability, Delaware, Nevada, Discrete Choice Models, Inertia

JEL Classification: G34, K22, L00, G28

Suggested Citation

Eldar, Ofer and Magnolfi, Lorenzo, Regulatory Competition and the Market for Corporate Law (April 15, 2019). 12(2) American Economic Journal: Microeconomics (2020): 60-98, Duke Law School Public Law & Legal Theory Series No. 2020-42, Available at SSRN: or

Ofer Eldar (Contact Author)

Duke University - School of Law and Fuqua School of Business ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Duke Innovation & Entrepreneurship Initiative ( email )

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Lorenzo Magnolfi

University of Wisconsin-Madison ( email )

1180 Observatory Drive
Madison, WI Wisconsin 53706
United States
6082628789 (Phone)


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