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Abstract:

This paper investigates why Delaware has become the dominant corporate law jurisdiction in the United States. We argue that Delaware’s preeminence lies in its flexible, judge-made standards, which adapt to changing economic conditions and balance managerial discretion with investor protection. Delaware’s market share surged from 1980 to 2010, a period marked by merger waves and rising institutional ownership. Using a structural model that incorporates this heterogeneity, we show that demand for legal flexibility, rather than doctrinal clarity, explains Delaware’s dominance. Our analysis highlights the value of common-law adaptability and contributes to debates on legal origins and investor protection.