Explaining the shape of corporate law: the role of competition
This paper reviews the effects of competition among jurisdictions for corporate chartering business on the shape of corporate law in the USA. It finds that competition has led to substantial uniformity, tempered by a dynamic process that introduces innovations from multiple jurisdictions. The speed with which changes are adopted depends on the identity of the sponsoring interest group. Corporate lawyers play a major role in the US corporate law production, but are hampered by collective action problems that are somewhat ameliorated by sponsorship of model legislation by the American Bar Association. Corporate managers appear to be the most effective sponsors, because changes they sponsor are adopted at a more rapid rate. The paper concludes that this competition for charters, influenced both by efficient capital markets and a desire to retain local chartering business, tends to compete away special interest benefits in corporate law. A comparison of the shape of corporate laws in Europe, where no competition exists, with US laws shows that groups such as management, labor and creditors have obtained significantly more benefits than in the USA. © 1997 John Wiley & Sons, Ltd.
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Volume (Year): 18 (1997)
Issue (Month): 7-8 ()
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