Institutional Support of the Firm: A Theory of Business Registries

Journal of Legal Analysis, 2010, 2(2), 525-76

52 Pages Posted: 17 Sep 2010 Last revised: 22 Jul 2018

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Date Written: August 23, 2011

Abstract

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: property rights, theory of the firm, business registries, formalization, starting a business, impersonal transactions

JEL Classification: O17, K22, K23, L59

Suggested Citation

Arruñada, Benito, Institutional Support of the Firm: A Theory of Business Registries (August 23, 2011). Journal of Legal Analysis, 2010, 2(2), 525-76, Available at SSRN: https://ssrn.com/abstract=1154102

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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