Does Charter Competition Foster Entrepreneurship? A Difference‐in‐Difference Approach to European Company Law Reforms

This article explores how company law reforms, particularly the reduction or abolition of minimum capital requirements, in various E uropean jurisdictions affect the decision of entrepreneurs to incorporate by means of a private limited liability company ( LLC ). Since the landmark rulings of the E uropean C ourt of Justice ( ECJ ) in the years 1999, 2002 and 2003, entrepreneurs in the E uropean U nion ( EU ) have been able to choose the country of incorporation independently of their real seat. As a result, the proliferation of the U nited K ingdom private company limited by shares has posed a competitive threat to many E uropean legislators. The article analyzes whether the reforms adopted in S pain, F rance, H ungary, G ermany and P oland have promoted the popularity of domestic legal forms and encouraged entrepreneurship more generally. Using a difference‐in‐difference approach, a strong impact is recorded in both respects, especially if the minimum capital requirement was reduced or abolished.