In the US it is principally the states that are in charge of regulating the internal affairs of corporations. States allow firms to relocate in other states. Hence, it is argued that states are engaging in a process of competing for corporate charters.
In the EU this basic setting is today quite similar: the EU Member States have separately created their own corporate law systems for decades. Though only since the European Court of Justice (ECJ) ruled in a series of famous decisions from Centros to Inspire Art that Member States have to recognize firms who are incorporated under other Member States’ corporate law, the possibility for regulatory competition in corporate is opened in the EU as well.
Comparing the situations in Europe and America from a law and economics perspective, the guiding hypothesis of this thesis is that while regulatory competition in corporate law can lead to efficient results, several problems have to be taken into account. Inefficiencies in American and European regulatory competition in corporate law are mainly due to these problems. A possible normative solution to such inefficiencies is assessed.
Other findings of this thesis involves the following aspects:
Firstly, while regulatory competition in corporate law in the U.S. might have been economically efficient in the past, it now can be identified several factors that lead to suboptimal outcomes which can be explained positively by applying existing theories on the issue as complementary ones.
Secondly, the European legal and economic situation resembles important factors of the American one while there are some major differences that will probably lead to different outcomes to those in the U.S. – though these are suboptimal as well.
Thirdly, a normative conclusion is drawn from these comparative observations. It can be efficient to restructure the framework in which regulatory competition in corporate law takes place in both, the U.S. and the EU. It is proposed a form of procedural harmonization and a simplification of conflict of laws that will allow states to compete for separate modules of legal sectors in corporate law. Thus innovation and learning processes in corporate regulations will be easier comparable and a sustainable race to the top may begin.
Inhaltsverzeichnis (Table of Contents)
- A. Introduction
- B. Literature Overview
- 1. Race to the Bottom
- 2. Race to the Top
- 3. Race to somewhere in between
- 4. No Race at all
- 5. Race with the federal legislator
- 6. The European Debate
- 7. Summary and Empirical Evidence
- a. The American Case
- b. The European Case
- C. Theoretical Foundations of Regulatory Competition
- 1. Jurisdictions as Monopolies or Competitors
- 2. The Market for Regulations
- 3. Interjurisdictional Competition
- 4. Forms of Regulatory Competition
- 5. The Object of Corporate Law: the Firm
- a. Necessity of Corporate Law
- b. Agency Problems in Corporate Law
- D. Functioning of Regulatory Competition in Corporate Law
- 1. Conditions of Regulatory Competition
- a. Sufficient Number of Regulators
- b. Mobility of Citizens or Product Factors
- 2. Advantages of Regulatory Competition
- 3. Problems of Regulatory Competition
- 4. Possible Solution: “Modulization” and Conflict of Laws facilitation
- 1. Conditions of Regulatory Competition
- E. Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis aims to conduct a comparative economic analysis of regulatory competition in corporate law within the European Union and the United States. It investigates whether this competition leads to efficient outcomes and identifies potential inefficiencies. The study assesses potential solutions for improving the regulatory framework.
- Regulatory competition in corporate law in the US and EU
- Efficiency of regulatory competition
- Comparison of legal and economic situations in the US and EU
- Identification of inefficiencies in regulatory competition
- Potential normative solutions for improving regulatory frameworks
Zusammenfassung der Kapitel (Chapter Summaries)
A. Introduction: This chapter sets the stage for the thesis by establishing the legal context created by European Court of Justice (ECJ) rulings, which allow firms to choose corporate charters across EU member states. It introduces the central research question: Does this regulatory competition lead to efficient corporate law, and if not, what reforms are necessary? The chapter compares the EU situation to the US, where Delaware corporate law has become dominant, and previews the thesis's methodology, which uses the framework of New Institutional Economics to analyze the "market for corporate charters" from both demand and supply perspectives, considering various market participants and their incentives, while accounting for information asymmetries and path dependencies.
B. Literature Overview: This section provides a comprehensive review of existing literature on regulatory competition, encompassing various perspectives such as the "race to the bottom," "race to the top," and scenarios falling between these extremes or representing a lack of competition altogether. The review also considers the role of federal legislators in the US context and examines the European debate surrounding the topic. A summary and analysis of empirical evidence from both the American and European cases are then presented, providing a foundation for the subsequent theoretical analysis.
C. Theoretical Foundations of Regulatory Competition: This chapter lays out the theoretical underpinnings of the analysis. It explores the roles of jurisdictions as either monopolies or competitors within the "market for regulations," examining interjurisdictional competition and the different forms it can take. It also defines the object of corporate law – the firm – discussing the necessity of corporate law and the agency problems it addresses (shareholder-manager, minority-majority shareholder, shareholder-third party).
D. Functioning of Regulatory Competition in Corporate Law: This chapter delves into the practical aspects of regulatory competition in corporate law. It examines the necessary conditions for such competition, including the existence of a sufficient number of regulators and the mobility of firms. The chapter then explores the advantages (legitimacy, power limitation, reduced rent-seeking, satisfaction of heterogeneous preferences, learning and innovation, comparative advantages, faster adjustment to ownership patterns) and problems (interstate and network externalities, path dependencies, lacking incentives for states, information problems including uncertainty in conflict of laws and bounded rationality) inherent in this type of competition. It culminates in a proposed solution: the "modulization" of corporate law and the facilitation of conflict-of-laws resolution.
Schlüsselwörter (Keywords)
Regulatory competition, corporate law, European Union, United States, Delaware, efficiency, New Institutional Economics, agency problems, interjurisdictional competition, conflict of laws, harmonization, modulization, race to the top, race to the bottom.
Frequently Asked Questions: A Comparative Economic Analysis of Regulatory Competition in Corporate Law
What is the main topic of this thesis?
This thesis conducts a comparative economic analysis of regulatory competition in corporate law within the European Union and the United States. It investigates whether this competition leads to efficient outcomes and identifies potential inefficiencies, ultimately assessing potential solutions for improving the regulatory framework.
What are the key themes explored in the thesis?
Key themes include regulatory competition in corporate law in the US and EU; the efficiency of regulatory competition; a comparison of legal and economic situations in the US and EU; the identification of inefficiencies in regulatory competition; and potential normative solutions for improving regulatory frameworks. The thesis specifically examines the "race to the bottom" and "race to the top" theories within the context of regulatory competition.
What is the structure of the thesis?
The thesis is structured into five main sections: An introduction setting the context and research question; a literature review encompassing various perspectives on regulatory competition and empirical evidence from the US and EU; a section detailing the theoretical foundations of regulatory competition, including the concept of the "market for regulations"; an examination of the functioning of regulatory competition in corporate law, including its advantages and disadvantages; and finally, a conclusion.
What theoretical framework is used?
The thesis utilizes the framework of New Institutional Economics to analyze the "market for corporate charters," considering various market participants, their incentives, information asymmetries, and path dependencies from both demand and supply perspectives.
What specific aspects of regulatory competition are analyzed?
The analysis delves into the conditions necessary for regulatory competition (sufficient regulators and firm mobility), its advantages (legitimacy, power limitation, reduced rent-seeking, etc.), and its problems (interstate externalities, path dependencies, information problems, etc.). The role of the European Court of Justice (ECJ) rulings, allowing firms to choose corporate charters across EU member states, is a central focus.
What is the proposed solution to the identified problems?
The thesis proposes "modulization" of corporate law and facilitation of conflict-of-laws resolution as a potential solution to the inefficiencies inherent in regulatory competition.
What is the comparison between the US and EU contexts?
The thesis compares the EU situation, where firms can choose corporate charters across member states, with the US situation, where Delaware corporate law has become dominant. This comparison is used to analyze the efficiency and potential inefficiencies of regulatory competition in both systems.
What are the key takeaways of the chapter summaries?
The introduction establishes the research question and methodology; the literature review synthesizes existing research and empirical evidence; the theoretical foundations section provides the analytical framework; the chapter on functioning explores the practical aspects of regulatory competition; and the conclusion summarizes the findings and proposed solutions.
What are the keywords associated with this thesis?
Keywords include regulatory competition, corporate law, European Union, United States, Delaware, efficiency, New Institutional Economics, agency problems, interjurisdictional competition, conflict of laws, harmonization, modulization, race to the top, race to the bottom.
- Quote paper
- LL.M. Robin Eyben (Author), 2006, Comparative Economic Analysis of Regulatory Competition in Corporate Law in Europe and the United States, Munich, GRIN Verlag, https://www.grin.com/document/76250
