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Where do firms incorporate? Deregulation and the cost of entry

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Author Info
Marco Becht
Colin Mayer
Hannes F. Wagner

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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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Publisher Info
Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2008fe04.

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Length: 41
Date of creation: 2008
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Handle: RePEc:sbs:wpsefe:2008fe04

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Web page: http://www.finance.ox.ac.uk
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Related research
Keywords: Incorporation; costs of regulation; regulatory competition;

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Find related papers by JEL classification:
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Guhan Subramanian, 2004. "The Disappearing Delaware Effect," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(1), pages 32-59, April.
  2. Oren Bar-Gill & Michal Barzuza & Lucian Bebchuk, 2002. "The Market for Corporate Law," NBER Working Papers 9156, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Roberta Romano, 1998. "Empowering Investors: A Market Approach to Securities Regulation," Yale School of Management Working Papers ysm74, Yale School of Management. [Downloadable!]
  4. Daines, Robert, 2001. "Does Delaware law improve firm value?," Journal of Financial Economics, Elsevier, vol. 62(3), pages 525-558, December. [Downloadable!] (restricted)
  5. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May. [Downloadable!] (restricted)
  6. Romano, Roberta, 1985. "Law as a Product: Some Pieces of the Incorporation Puzzle," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(2), pages 225-83, Fall.
  7. Oren Bar-Gill & Michal Barzuza & Lucian Bebchuk, 2006. "The Market for Corporate Law," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(1), pages 134-160, March. [Downloadable!] (restricted)
  8. Marcel Kahan & Ehud Kamar, 2002. "The Myth of State Competition in Corporate Law," Berkeley Olin Program in Law & Economics, Working Paper Series 1065, Berkeley Olin Program in Law & Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simon Deakin, 2008. "Regulatory Competition in Europe after Laval," ESRC Centre for Business Research - Working Papers wp364, ESRC Centre for Business Research. [Downloadable!]
  2. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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