Diversity in Shareholder Protection in Common Law Countries

Abstract:     
Previous research often emphasised the similarity of shareholder protection in common law (or English legal origin) countries. Conversely, this article found a remarkable diversity of shareholder protection in common law countries. Using our new shareholder protection index with 60 variables, we presented some graphical representations to highlight and discuss diversity across the UK, the US and India. Our study finds that the UK, the US and India do not only differ in the modes by which law on shareholder protection has changed over time but also in the mechanisms by which they protect shareholders or the areas of emphasis. For instance, we find that of the three countries, the Indian law on shareholder protection has changed the least due to judge-made law and contains the maximum number of provisions relating to public control or mandatory law as a mechanism for protecting shareholders. The UK law in relation to voting powers has improved over the concerned period with increased empowerment of the general meeting. With respect to the laws dealing with listed company variables, we find that in the UK the law improved steadily since the 1990s and in the US it particularly leaped in 2002. The laws in India in this regard really started developing only after the late 1980s and early 1990s with major improvements around 2001. Thus our study shows that even amongst three undoubtedly English legal origin countries the laws vary so much that their classification into one single group according to their legal origins seems almost naïve. This also casts a doubt on the claim that a particular legal origin matters for the quality of law which in turn affects corporate growth and economic development.

Number of Pages in PDF File: 7

Keywords: Shareholder protection, leximetrics, numerical comparative law, law and finance, La Porta et al., LLSV, comparative company law, comparative corporate law, comparative corporate governance, legal origins, convergence, India

JEL Classification: G30, G38, K22, N20, N40, N50

Accepted Paper Series