Under the state corporate chartering system in the U.S., managers may seek shareholder approval to reincorporate the firm in a new state, regardless of the firm’s physical location, whenever they perceive that the corporate legal environment in the new state is better for the firm. Legal scholars continue to debate the merits of this system, with some arguing that it promotes contractual efficiency and others arguing that it often results in managerial entrenchment. We discuss the contrasting viewpoints on reincorporations and then summarize extant empirical evidence on why firms reincorporate, when they reincorporate, and where they reincorporate to.We conclude by discussing how the motives managers offer for reincorporations, and the actions they take upon reincorporating, influence how stock prices react to reincorporation decisions.
CITATION STYLE
Heron, R. A., & Lewellen, W. G. (2022). Reincorporation. In Encyclopedia of Finance, Third Edition (pp. 729–741). Springer International Publishing. https://doi.org/10.1007/978-3-030-91231-4_19
Mendeley helps you to discover research relevant for your work.