Where Do Firms Incorporate? Deregulation and the Cost of Entry
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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|Date of creation:||01 Jan 2008|
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