Firms' Decisions Where to Incorporate
Journal of Law and Economics, Vol. 46, pp. 383-425, 2003
Harvard Law and Economics Discussion Paper No. 351
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 003/2002
50 Pages Posted: 11 Apr 2003 Last revised: 26 Mar 2024
There are 2 versions of this paper
Firms' Decisions Where to Incorporate
Firms' Decisions Where to Incorporate
Date Written: 2003
Abstract
This paper empirically investigates the determinants of firms’ decisions where to incorporate. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-of-state incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the states that adopted them to more than double the percentage of local firms that incorporated in-state (from 23% to 49%). Indeed, we find no evidence that the incorporation market has even penalized the three states that passed antitakeover statutes widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state’s ability to attract incorporations from firms located in and out of the state, and we investigate several possible explanations for this home-state advantage.
The data on which this paper is based is available for download at Lucian Bebchuk's home page.
Keywords: Delaware, incorporation, corporate governance, regulatory competition, managers, shareholders, takeovers, antitakeover statutes, antitakeover defenses, home bias
JEL Classification: G30, G38, H70, K22
Suggested Citation: Suggested Citation
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