A Regulatory Competition Theory of Indeterminacy in Corporate Law

54 Pages Posted: 11 Jun 2003

See all articles by Ehud Kamar

Ehud Kamar

Tel Aviv University - Buchmann Faculty of Law; European Corporate Governance Institute (ECGI)

Abstract

This Article revisits the debate on the desirability of interstate competition in providing corporate law. It argues that the market for corporate law is imperfectly competitive, and therefore may not yield the optimal product to either shareholders or managers. Delaware dominates the market as a result of several competitive advantages that are difficult for other states to replicate. These advantages include network benefits emanating from Delaware's status as the leading incorporation jurisdiction, Delaware's proficient judiciary and Delaware's unique commitment to corporate needs. Delaware can enhance these advantages by developing indeterminate and judge-oriented law, even if such law is otherwise undesirable. Indeterminacy makes Delaware laws inseparable from its application by Delaware's courts and thus excludes non-Delaware corporations from network benefits, accentuates Delaware's judicial advantage, and makes Delaware's commitment to firms more credible. Whether state competition constitutes a race to the top, to the bottom, or somewhere in between, excessive indeterminacy may add an additional degree of inefficiency to the law.

Suggested Citation

Kamar, Ehud, A Regulatory Competition Theory of Indeterminacy in Corporate Law. Columbia Law Review, Vol. 98, p. 1908, 1998. Available at SSRN: https://ssrn.com/abstract=412561 or http://dx.doi.org/10.2139/ssrn.412561

Ehud Kamar (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
972-3-6407301 (Phone)

European Corporate Governance Institute (ECGI)

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

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