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Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?

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  • Roberta Romano

Abstract

This article provides an analysis of why regulatory competition in corporate law has operated, for the most part, successfully in the United States, and critiques the position of commentators who are sceptical of the significance and extent of state competition. The article begins by setting out the context in which regulatory competition has been most recently criticized, the US Congress's response to corporate accounting scandals in the Sarbanes--Oxley Act, and by briefly noting how the problematic features of that legislative response underscore the benefits of regulatory competition. It then evaluates recent criticisms of regulatory competition that focus on the role of the federal government, or the incentives of states other than the leading incorporation state, Delaware, and conclude that US corporate law is not the product of state competition. The article contends that these permutations on the state competition debate do not provide a satisfactory positive explanation of the behaviour or the influence of the states and federal government. The minimum policy implication of the analysis is that it would be imprudent for policy-makers to overlook the competitive regulatory experience in US corporate law when assessing the approach to take to company and securities law. Copyright 2005, Oxford University Press.

Suggested Citation

  • Roberta Romano, 2005. "Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?," Oxford Review of Economic Policy, Oxford University Press, vol. 21(2), pages 212-231, Summer.
  • Handle: RePEc:oup:oxford:v:21:y:2005:i:2:p:212-231
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    Cited by:

    1. Marianne Ojo, 2011. "Co-operative and competitive enforced self regulation: The role of governments, private actors and banks in corporate responsibility," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(2), pages 139-155, May.
    2. Emanuela Carbonara & Francesco Parisi, 2009. "Choice of law and legal evolution: rethinking the market for legal rules," Public Choice, Springer, vol. 139(3), pages 461-492, June.
    3. Ahmed Abdel-Meguid & Anwer Ahmed & Scott Duellman, 2013. "Auditor independence, corporate governance and aggressive financial reporting: an empirical analysis," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 283-307, May.
    4. Deffains, Bruno & Demougin, Dominique, 2008. "Legal competition, political process and irreversible investment decisions," European Journal of Political Economy, Elsevier, vol. 24(3), pages 615-627, September.

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