The Myth of State Competition in Corporate Law

Abstract

This Article challenges the conventional wisdom that states compete for incorporations. Delaware aside, no state stands to gain meaningful tax revenues or legal business from chartering firms, and no state takes significant steps to attract incorporations. The explanation for this apathy lies in a combination of economic entry barriers and political factors. This analysis of the market for incorporations has implications for the present structure of corporate law, for the desirability of federal intervention, and for theories of regulatory competition in general.

Keywords: Delaware, Incorporation, Corporate Charters, Corporate Governance, Regulatory Competition, Managers, Shareholders, Takeovers, Barriers to Entry, Network Externalities, Federalism, Legislation, Public Choice, Political Economy, Franchise Tax

JEL Classification: G30, G38, H70, K22, H25, H71, H73, L13, R58