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Where Do Firms Incorporate? Deregulation and the Cost of Entry

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  • Colin Mayer
  • Marco Becht
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    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

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2008fe04.

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    Date of creation: 01 Jan 2008
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    Handle: RePEc:oxf:wpaper:2008fe04

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    Related research

    Keywords: Incorporation; Costs of Regulation; Regulatory Competition;

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    Cited by:
    1. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.

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