Journal Article

Institutional Support of the Firm: A Theory of Business Registries

Benito Arruñada

in Journal of Legal Analysis

Published on behalf of The John M. Olin Center for Law, Economics and Business at Harvard Law School with the support of the Considine Family Foundation

Volume 2, issue 2, pages 525-576
Published in print January 2010 | ISSN: 2161-7201
Published online January 2010 | e-ISSN: 1946-5319 | DOI: http://dx.doi.org/10.1093/jla/2.2.525
Institutional Support of the Firm: A Theory of Business Registries

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Registering originative business contracts allows entrepreneurs and creditors to choose, and courts to enforce, market-friendly “contract” rules that protect innocent third parties when adjudicating disputes on subsequent contracts. This reduces information asymmetry for third parties, which enhances impersonal trade. It does so without seriously weakening property rights, because it is rightholders who choose or activate the legal rules and can therefore minimize the cost of any possible weakening. Registries are essential not only to make the chosen rules public but to ensure rightholders' commitment and avoid rule-gaming, because independent registries make rightholders' choices verifiable by courts. The theory is supported by comparative and historical analyses.

Keywords: O17; K22; K23; L59; property rights; theory of the firm; business registries; formalization; starting a business; impersonal transactions

Journal Article.  0 words. 

Subjects: Law and Economics ; Regulation and Industrial Policy ; Economic Development

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