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The Demand for Corporate Law: Statutory Flexibility, Judicial Quality, or Takeover Protection?

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  • Marcel Kahan

Abstract

This article provides an empirical examination of the determinants of firms' decisions where to incorporate. Consistent with our theoretical predictions, we find substantial evidence that firms are more likely to incorporate in states with corporate law rules that offer firms flexibility to devise their governance arrangement and significant but less robust evidence that firms are more likely to incorporate in states with higher quality judicial systems. Unlike prior studies, we find no evidence that firms are more or less likely to incorporate in states with anti-takeover statutes. The latter results are consistent with the hypothesis that anti-takeover statutes have no significant effect on a company's marginal ability to resist takeovers. Copyright 2006, Oxford University Press.

Suggested Citation

  • Marcel Kahan, 2006. "The Demand for Corporate Law: Statutory Flexibility, Judicial Quality, or Takeover Protection?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 340-365, October.
    • Handle: RePEc:oup:jleorg:v:22:y:2006:i:2:p:340-365
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    File URL: http://hdl.handle.net/10.1093/jleo/ewj019
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    Cited by:

    1. Jens Dammann & Matthias Schündeln, 2012. "Where Are Limited Liability Companies Formed? An Empirical Analysis," Journal of Law and Economics, University of Chicago Press, vol. 55(4), pages 741-791.
    2. Martin Strieborny & Madina Kukenova, 2016. "Investment in Relationship-Specific Assets: Does Finance Matter?," Review of Finance, European Finance Association, vol. 20(4), pages 1487-1515.
    3. Adam B. Badawi & Daniel L. Chen, 2017. "The Shareholder Wealth Effects of Delaware Litigation," American Law and Economics Review, American Law and Economics Association, vol. 19(2), pages 287-326.
    4. Brian Broughman & Jesse M. Fried & Darian Ibrahim, 2014. "Delaware Law as Lingua Franca: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 57(4), pages 865-895.
    5. Bruce G. Carruthers & Naomi R. Lamoreaux, 2016. "Regulatory Races: The Effects of Jurisdictional Competition on Regulatory Standards," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 52-97, March.
    6. Aguir, Iness & Burns, Natasha & Mansi, Sattar A. & Wald, John K., 2014. "Liability protection, director compensation, and incentives," Journal of Financial Intermediation, Elsevier, vol. 23(4), pages 570-589.
    7. Lucian A. Bebchuk & Michael S. Weisbach, 2012. "The State of Corporate Governance Research," Springer Books, in: Sabri Boubaker & Bang Dang Nguyen & Duc Khuong Nguyen (ed.), Corporate Governance, edition 127, pages 325-346, Springer.
    8. Leventis, Stergios, 2018. "An empirical test of SEC enforcement in the audit market," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 30(C), pages 106-116.
    9. Jagannathan, Murali & Pritchard, A.C., 2017. "Do Delaware CEOs get fired?," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 85-101.
    10. Matthew D. Cain & Steven M. Davidoff, 2012. "Delaware's Competitive Reach," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 9(1), pages 92-128, March.
    11. John Armour & Bernard Black & Brian Cheffins, 2012. "Is Delaware Losing its Cases?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 9(4), pages 605-656, December.

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