The Market for Corporate Law / Oren Bar-Gill, Michal Barzuza, Lucian Bebchuk.

Format:

Book

Author/Creator:

Bar-Gill, Oren.

Contributor:

National Bureau of Economic Research.

Barzuza, Michal.

Bebchuk, Lucian.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9156.

NBER working paper series no. w9156

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations. The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.

Notes:

Print version record

September 2002.