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American Law and Economics Review Advance Access originally published online on March 17, 2006
American Law and Economics Review 2006 8(1):1-19; doi:10.1093/aler/ahj007
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© The Author 2006. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Corporation and Contract

Henry Hansmann

Yale Law School

Send correspondence to: Henry Hansmann, Yale Law School. E-mail: henry.hansmann{at}yale.edu.

Publicly traded corporations rarely use the nearly absolute freedom afforded them to draft charters that deviate from the default terms of state corporation law. Conventional explanations for this phenomenon are unconvincing. A more promising explanation lies in the lack of any feasible amendment mechanism that will assure efficient adaptation of charter terms as changing circumstances dictate during the long expected lifetime of a public corporation. In effect, by adopting state law default terms, corporations delegate to the state the process of amending charter provisions over time.


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