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Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?

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  • Roberta Romano

Abstract

This article provides an analysis of why regulatory competition in corporate law has operated, for the most part, successfully in the United States, and critiques the position of commentators who are skeptical of the significance and extent of state competition. The article begins by setting out the context in which regulatory competition has been most recently criticized, the U.S. Congress's response to corporate accounting scandals in the Sarbanes-Oxley Act, and by briefly noting how the problematic features of that legislative response underscore the benefits of regulatory competition. It then evaluates recent criticisms of regulatory competition that focus on the role of the federal government, or the incentives of states other than the leading incorporation state, Delaware, and conclude that U.S. corporate law is not the product of state competition. The article contends that these permutations on the state competition debate do not provide a satisfactory positive explanation of the behavior or the influence of the states and federal government. The minimum policy implication of the analysis is that it would be imprudent for policymakers to overlook the competitive regulatory experience in U.S. corporate law when assessing the approach to take to company and securities law. Prepared for the Special Issue of the Oxford Review of Economic Policy on Corporate Governance and the Corporate Governance Conference at the Said Business School, University of Oxford, January 28, 2005.

Suggested Citation

  • Roberta Romano, 2005. "Is Regulatory Competition a Problem or Irrelevant for Corporate Governance?," Yale School of Management Working Papers amz2601, Yale School of Management, revised 01 Jan 2006.
  • Handle: RePEc:ysm:wpaper:amz2601
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    File URL: https://repec.som.yale.edu/icfpub/publications/2601.pdf
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    References listed on IDEAS

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    1. repec:aei:rpbook:53576 is not listed on IDEAS
    2. repec:aei:rpbook:53337 is not listed on IDEAS
    3. Romano, Roberta, 1991. "The Shareholder Suit: Litigation without Foundation?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(1), pages 55-87, Spring.
    4. Carney, William J, 1997. "The Political Economy of Competition for Corporate Charters," The Journal of Legal Studies, University of Chicago Press, vol. 26(1), pages 303-329, January.
    5. Sanjai Bhagat & Roberta Romano & Yale Working, 2005. "Empirical Studies of Corporate Law," Yale School of Management Working Papers amz2520, Yale School of Management, revised 01 Sep 2005.
    6. Roberta Romano, 2004. "The Sarbanes-Oxley Act and the Making of Quack Corporate Governance," Yale School of Management Working Papers amz2653, Yale School of Management, revised 01 Jul 2005.
    7. Romano, Roberta, 1985. "Law as a Product: Some Pieces of the Incorporation Puzzle," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(2), pages 225-283, Fall.
    Full references (including those not matched with items on IDEAS)

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