The Value of Judicial Independence: Evidence from 18th Century England
University of Southern California Law School
Paul G. Mahoney
University of Virginia School of Law
USC Law and Economics Research Paper No. 04-27; and USC Law and Public Policy Research Paper No. 04-27
This paper assesses the impact of changes in judicial independence on equity markets. North and Weingast (1989) argue that judicial independence and other institutional changes inaugurated by the Glorious Revolution of 1688-89 improved public and private finance in England by putting restraints on the government. We calculate abnormal equity returns at critical points in the passage of statutes giving judges greater security of tenure and higher salaries. Early eighteenth-century legislation granting tenure during good behavior is associated with large and statistically significant positive abnormal returns. Other statutes had positive but generally insignificant effects.
Number of Pages in PDF File: 39
Keywords: Judicial independence, Glorious Revolution, law and finance
JEL Classification: H11, K40, N43Accepted Paper Series
Date posted: September 6, 2004
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