The Core Institutions that Support Strong Securities Markets
Bernard S. Black
Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
As published in Business Lawyer, Vol. 55, pp. 1565-1607, 2000
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
Number of Pages in PDF File: 48
JEL Classification: G38, K22
Date posted: June 16, 2000
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