Transactional Legal Opinions As Evidence of the Tradeoffs Between Business Registration and Contractual Costs

Benito Arruñada (Pompeu Fabra University)
Carlos A. Manzanares (Vanderbilt University)

Abstract: The role of corporate registries in supporting corporate contracting has traditionally been ignored or trivialized, which has often lead to narrow policies focused on creating minimalist registries and reducing registration costs. Arruñada (2010) proposed a theory that explains how these registries facilitate corporate transactions. We test this theory by constructing and exploiting a dataset of model transactional legal opinion comments and using the lengths of these comments as proxies for legal opinion costs. In particular, we test for whether stronger registration requirements decrease the length of lawyer comments on model legal opinions included in an authoritative report on legal opinions created by the International Bar Association. We confirm the presence of this tradeoff by finding that in countries with less stringent registration requirements, legal opinion comments are longer, even after controlling for the legal origin, European Union affiliation, and judicial quality of each country.

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