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Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?

  • Roberta Romano
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    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 skeptical 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 U.S. 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 U.S. 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 behavior or the influence of the states and federal government. The minimum policy implication of the analysis is that it would be imprudent for policymakers to overlook the competitive regulatory experience in U.S. corporate law when assessing the approach to take to company and securities law. Prepared for the Special Issue of the Oxford Review of Economic Policy on Corporate Governance and the Corporate Governance Conference at the Said Business School, University of Oxford, January 28, 2005.

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    File URL: http://icfpub.som.yale.edu/publications/2601
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    Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2601.

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    Date of creation: 01 Mar 2005
    Date of revision: 01 Jan 2006
    Handle: RePEc:ysm:somwrk:amz2601
    Contact details of provider: Web page: http://icf.som.yale.edu/

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    1. repec:aei:rpbook:24120 is not listed on IDEAS
    2. Carney, William J, 1997. "The Political Economy of Competition for Corporate Charters," The Journal of Legal Studies, University of Chicago Press, vol. 26(1), pages 303-29, January.
    3. Romano, Roberta, 1985. "Law as a Product: Some Pieces of the Incorporation Puzzle," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(2), pages 225-83, Fall.
    4. Lucian Bebchuk & Alma Cohen, 2002. "Firms' Decisions Where to Incorporate," NBER Working Papers 9107, National Bureau of Economic Research, Inc.
    5. Kahan, Marcel & Kamar, Ehud, 2002. "The Myth of State Competition in Corporate Law," Berkeley Olin Program in Law & Economics, Working Paper Series qt3xq7p9xw, Berkeley Olin Program in Law & Economics.
    6. Roberta Romano, 2004. "The Sarbanes-Oxley Act and the Making of Quack Corporate Governance," Yale School of Management Working Papers amz2653, Yale School of Management, revised 01 Jul 2005.
    7. Sanjai Bhagat & Roberta Romano & Yale Working, 2005. "Empirical Studies of Corporate Law," Yale School of Management Working Papers amz2520, Yale School of Management, revised 01 Sep 2005.
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