Firms' Decisions on Where to Incorporate

Lucian Bebchuk () and Alma Cohen

No 3514, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper empirically investigates the decisions of US publicly traded firms on where to incorporate. We study the features of states that make them attractive to incorporating firms and the characteristics of firms that determine whether they incorporate in or out of their state of location. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-of-state incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the states that adopted them to more than double the percentage of local firms that incorporated in-state (from 23% to 49%). Indeed, the incorporation market has not even penalized the three states that passed two extreme 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 and out of the state, 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 can be expected to increase further in the future. Our findings have significant implications for corporate governance, regulatory competition, and takeover law.

Keywords: Delaware; Incorporation; Corporate governance; Regulatory competition; Managers; Shareholders; Takeovers; Antitakeover statutes; Antitakeover defences; Home bias (search for similar items in EconPapers)
JEL-codes: G30 G38 H70 K22 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-cfn, nep-ind and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://cepr.org/publications/DP3514 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Firms' Decisions Where to Incorporate (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:3514

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3514

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().