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Where do firms incorporate? Deregulation and the cost of entry

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Author Info

  • Becht, Marco
  • Mayer, Colin
  • Wagner, Hannes F.

Abstract

We study how deregulation of corporate law affects the decision of entrepreneurs of where to incorporate. Recent rulings by the European Court of Justice (ECJ) have enabled entrepreneurs to select their country of incorporation independently of their real seat. We analyze foreign incorporations in the U.K., where incorporations of limited liability companies can be arranged at low cost. Using data for over 2 million companies from around the world incorporating in the U.K., we find a large increase in cross-country incorporations from E.U. Member States following the ECJ rulings. In line with regulatory cost theories, incorporations are primarily driven by minimum capital requirements and setup costs in home countries. We record widespread use of special incorporation agents to facilitate legal mobility across countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 14 (2008)
Issue (Month): 3 (June)
Pages: 241-256
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eee:corfin:v:14:y:2008:i:3:p:241-256

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Web page: http://www.elsevier.com/locate/jcorpfin

For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

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Cited by:
  1. Chris Mallin & Kean Ow-Yong, 2010. "The UK Alternative Investment Market – Ethical Dimensions," Journal of Business Ethics, Springer, vol. 95(2), pages 223-239, September.
  2. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.

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