November 11, 2012
Fried et alia on Delaware Law as Lingua Franca
Delaware Law as Lingua Franca: Theory and Evidence, by Jesse M. Fried, Harvard Law School; Brian J. Broughman, Indiana University Maurer School of Law; and Darian M. Ibrahim, University of Wisconsin Law School, was recently posted on SSRN. Here is the abstract:
Why does Delaware dominate the market for corporate charters? Analyzing the incorporation and reincorporation decisions of 1,850 VC-backed startups, we show that firms often choose Delaware corporate law because it is the only law “spoken” by both in-state and out-of-state investors. Indeed, this “lingua-franca” effect is just as important as other factors that have been found to influence domicile decisions, such as corporate-law flexibility and the quality of a state’s judiciary. Our study provides further evidence that Delaware’s dominance is not necessarily due to the intrinsic quality of its corporate law.
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