A Regulatory Competition Theory of Indeterminacy in Corporate Law
Year: 1998
Type: article
Abstract: This Article revisits the debate on the desirability of interstate competition in providing corporate law. It argues that the market for corporate law is imperfectly competitive, and therefore may not yield the optimal product to either shareholders or managers. Delaware dominates the market as a result of several competitive advantages that are difficult for other states to replicate. These advantages include network benefits emanating from Delaware's status as the leading incorporation jurisdiction, Delaware's proficient judiciary and Delaware's unique commitment to corporate needs. Delaware can enhance these advantages by developing indeterminate and judge-oriented law, even if such law is otherwise undesirable. Indeterminacy makes Delaware laws inseparable from its application by Delaware's courts and thus excludes non-Delaware corporations from network benefits, accentuates Delaware's judicial advantage, and makes Delaware's commitment to firms more credible. Whether state competition constitutes a race to the top, to the bottom, or somewhere in between, excessive indeterminacy may add an additional degree of inefficiency to the law.
Source: Columbia Law Review
DOI: 10.2307/1123527
Author: Ehud Kamar
Institutions: Tel Aviv University, European Corporate Governance Institute
Language: English
Topic: Corporate Governance and Law
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124478281