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Where Do Firms Incorporate?

Author

Listed:
  • Mayer, Colin
  • Becht, Marco
  • Wagner, Hannes

Abstract

Over the last few years, a series of rulings by the European Court of Justice (ECJ) has opened up the European Union to cross-border mobility in incorporation. In this paper we explore how deregulation and the costs of regulation have affected the location decisions of firms. Using a newly constructed dataset of companies from around the world incorporating in the U.K. between 1997 and 2005 we find a large increase in new incorporations of limited liability firms from E.U. Member States following the ECJ rulings. We find that incorporation costs, in particular minimum capital requirements, and delays in incorporation are significant influences on firms? location decisions. Our results confirm the relevance of price to firms? choice of legal systems. We also report that cross-border incorporation has prompted regulatory competition between E.U. Member States to provide low-cost corporate law to limited liability companies.

Suggested Citation

  • Mayer, Colin & Becht, Marco & Wagner, Hannes, 2006. "Where Do Firms Incorporate?," CEPR Discussion Papers 5875, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5875
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    References listed on IDEAS

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    Cited by:

    1. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.
    2. Simon Deakin, 2008. "Regulatory Competition in Europe after Laval," Working Papers wp364, Centre for Business Research, University of Cambridge.

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    More about this item

    Keywords

    Incorporation; entrepreneurship; Financial regulation; Regulatory competition;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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