Affiliation:
1. Duke University, 210 Science Drive, Durham NC, 27708 (email: )
2. University of Wisconsin-Madison, 1180 Observatory Drive, Madison WI, 53706 (email: )
Abstract
This article develops an empirical model of firms’ choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a database of firm incorporation decisions from 1995 to 2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada’s rise is due to the preferences of small firms. Consistent with the bonding hypothesis, our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws. (JEL G34, G38, K21, K22, L25, L51)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
7 articles.
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