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This Article applies a model based on the interest-group theory of regulation to explain and predict the legal rules that affect the affairs of corporations chartered in Delaware. Two existing theories purport to explain and predict these legal rules. The traditional, "reformist" theory depicts Delaware as the winner of a deplorable "race to the bottom" in which competition among the states for franchise taxes has led Delaware to produce a system of corporate law rules that permits corporate managers to exploit shareholders for their own ends. More recently, the law and economics movement has produced a competing theory, the corporate federalist theory, which posits that the desire to obtain income from corporate charters has led Delaware and other states to develop efficient corporate law rules. Far from exploiting shareholders, this theory holds that these rules actually benefit shareholders by increasing the wealth of corporations chartered in states with these rules.

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