Firms' Decisions Where to Incorporate

Lucian Bebchuk, Alma Cohen

NBER Working Paper No. 9107
Issued in August 2002
NBER Program(s):Corporate Finance, Law and Economics

This paper empirically investigates the decisions of publicly traded firms where to incorporate. We study the features of states that make them attractive to incorporating firms and the characteristics of firms that determine whether they incorporate in or out of their state of location. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-of-state incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the states that adopted them to more than double the percentage of local firms that incorporated in-state (from 23% to 49%). Indeed, the incorporation market has not even penalized the three states that passed two extreme antitakeover statutes that have been widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state's ability to attract incorporations from firms located in and out of the state, and we investigate several possible explanations for this home-state advantage. Finally, we find that Delaware's dominance is greater than has been recognized and can be expected to increase further in the future. Our findings have significant implications for corporate governance, regulatory competition, and takeover law.

download in pdf format
   (341 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9107

Published: Bebchuk, Lucian and Alma Cohen. “Firms’ Decisions Where to Incorporate." Journal of Law and Economics 46 (2003): 383-425. citation courtesy of

Users who downloaded this paper also downloaded* these:
Bebchuk, Cohen, and Ferrell w9380 Does the Evidence Favor State Competition in Corporate Law?
Gillingham Place to Place Rent Comparisons
Bebchuk and Ferrell w7232 Federalism and Takeover Law: The Race to Protect Managers from Takeovers
Heckman Heterogeneity and State Dependence
Romano w9126 Does Confidential Proxy Voting Matter?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us