Paper Abstract
351. Lucian Bebchuk and Alma Cohen, Firms' Decisions where to Incorporate, 03/2002; subsequently published in Journal of Law and Economics, Vol. 46, 2003, 383-425.
Abstract: This paper investigates empirically the decisions of publicly traded firms where to incorporate. We study the features of states that make them more and less attractive to incorporating firms and the characteristics of firms that determine whether they incorporate outside their state of location. We find that states that offer stronger antitakeover protections are significantly more successful both in retaining in-state companies and attracting out-of-state incorporations. Indeed, the incorporations market has note even the three states that passed severe antitakeover statutes that have been widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state's ability to attract incorporations from firms located in it than out-of-state firms, and we investigate several possible explanations for this home-state advantage. Finally, we find that Delaware's dominance is greater than has been recognized and that Delaware's market share can be expected to increase further in the future. Our findings have significant implications for the ongoing debates on regulatory competition, takeover law, and corporate governance.