The John M. Olin Center

Paper Abstract

721. Brian Broughman, Jesse M. Fried & Darian Ibrahim, Delaware Law as Lingua Franca: Evidence from VC-Backed Startups, 07/2012.

Abstract: Why does Delaware dominate the market for corporate charters? Analyzing the incorporation and reincorporation decisions of 1,850 VC-backed startups, we show that firms often choose Delaware corporate law because it is the only law "spoken" by both in-state and out-of-state investors. Indeed, this "lingua-franca" effect is just as important as other factors that have been found to influence domicile decisions, such as corporate-law flexibility and the quality of a state's judiciary. Our study provides further evidence that Delaware's dominance is not necessarily due to the intrinsic quality of its corporate law.


721: PDF