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The Core Institutions that Support Strong Securities Markets

Bernard S. Black
Northwestern University - School of Law; Northwestern University - Kellogg School of Management; University of Texas at Austin - School of Law; McCombs School of Business, University of Texas at Austin; European Corporate Governance Institute (ECGI)

As published in Business Lawyer, Vol. 55, pp. 1565-1607, 2000

Abstract:
A strong securities markets rests on a complex network of supporting institutions that ensure that minority shareholders (i) receive good information about the value of a company's business, and (ii) can have confidence that a company's managers and controlling shareholders won't cheat them out of most or all of the value of their investment. A country whose laws and related institutions fail on either count cannot develop a strong stock market, forcing firms to rely on internal financing or bank financing - both of which have important shortcomings. This article explains why these two investor protection issues are critical, related, and hard to solve, and discusses which laws and institutions are most important for each.

This article is an earlier and shorter version of Bernard Black, "The Legal and Institutional Preconditions for Strong Securities Markets," UCLA Law Review, vol. 48, pp. 781-855 (2001), which is available on SSRN at http://ssrn.com/abstract_id=182169

JEL Classifications: G38, K22

Accepted Paper Series

Date posted: June 16, 2000 ; Last revised: January 20, 2003

Suggested Citation

Black, Bernard S., The Core Institutions that Support Strong Securities Markets (June 2000). As published in Business Lawyer, Vol. 55, pp. 1565-1607, 2000. Available at SSRN: http://ssrn.com/abstract=231120 or doi:10.2139/ssrn.231120

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