How State Competition for Corporate Charters Has Changed the Delaware Effect

An important feature of U.S. corporate law is regulatory competition among various states. Unlike firms in other industrialized countries, American corporations can choose to incorporate in any state, even if they do not do business there. A large body of academic literature has studied the merits and weaknesses of this approach to regulating corporations, focusing primarily on the value of state corporate laws.  This debate has focused on two competing hypotheses. In the first, interstate competition in corporate laws promotes a “race to the top” by motivating states to enact laws that are optimal for shareholders and that minimize managerial … Read more