CFA Practice Question

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CFA Practice Question

Over 40% of New York stock-exchange-listed companies, and over 50% of Fortune 500 companies, are incorporated in Delaware. As part of this process, Delaware, "a pygmy among the 50 states prescribes, interprets, and indeed denigrates national corporate policy as an incentive to encourage incorporation within its borders, thereby increasing its revenue" (Cary, supra, n.5, 701.). This phenomenon is referred to as:

A. Regulatory attraction.
B. Regulatory competition.
C. Regulatory advantage.
Correct Answer: B

This is perhaps the best known case of regulatory competition which seems to create a "race to the bottom" in standards.

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