Institutional Obstacles to Incorporation
This chapter draws on original indicators of joint-stock company formation in Rio de Janeiro, along with the history of legislative changes bearing on capital markets, to test the hypothesis that the state's regulatory action stifled private financial development through the early 1880s. It first summarizes the organizational forms of the firm available to entrepreneurs in Imperial Brazil. It then details the changes in the Empire's corporate law, provides an overview of the types of firms that operated in Brazil, and presents an analytic chronology of commercial legislation. The chapter also presents a model of the entrepreneur's choice of organizational form when seeking a corporate charter is costly and entrepreneurs face expropriation risk. It suggests quantitative indicators of firm formation (for both corporations and partnerships) and relates changes in them to the timing of regulatory changes. The results here are consistent with model predictions.
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