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Institutional support of the firm: A theory of business registries

Registering originative business contracts allows entrepreneurs and creditors to choose, and courts to enforce market-friendly “contract” rules that protect innocent third parties when adjudicating disputes on subsequent contracts. This reduces information asymmetry for third parties, which enhances impersonal trade. It does so without seriously weakening property rights, because it is rightholders who choose or activate the legal rules and can, therefore, minimize the cost of any possible weakening. Registries are essential not only to make the chosen rules public but to ensure rightholders’ commitment and avoid rule-gaming, because independent registries make rightholders’ choices verifiable by courts. The theory is supported by comparative and historical analyses.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1195.

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Date of creation: Jan 2010
Date of revision: Sep 2010
Handle: RePEc:upf:upfgen:1195
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
  2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  3. Hansmann, Henry & Kraakman, Reinier, 2002. "Property, Contract, and Verification: The Numerus Clausus Problem and the Divisibility of Rights," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S373-420, June.
  4. Benito Arruñada, 2011. "Mandatory accounting disclosure by small private companies," European Journal of Law and Economics, Springer, vol. 32(3), pages 377-413, December.
  5. Masten, Scott E, 1988. "A Legal Basis for the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 181-98, Spring.
  6. John Armour, 2006. "Legal capital: an outdated concept," ESRC Centre for Business Research - Working Papers wp320, ESRC Centre for Business Research.
  7. Henry Hansmann & Reinier Kraakman, 2000. "The Essential Role of Organizational Law," Yale School of Management Working Papers ysm147, Yale School of Management, revised 01 Nov 2001.
  8. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
  9. Williamson, Oliver E, 1996. "Revisiting Legal Realism: The Law, Economics, and Organization Perspective," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 383-420.
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