Public and Private Enforcement of Securities Laws: Resource-Based Evidence

55 Pages Posted: 11 Jul 2007 Last revised: 13 Jan 2015

Date Written: March 16, 2009


Ascertaining which enforcement mechanisms work to protect investors has been both a focus of recent work in academic finance and an issue for policy-making at international development agencies. According to recent academic work, private enforcement of investor protection via both disclosure and private liability rules goes hand in hand with financial market development, but public enforcement fails to correlate with financial development and, hence, is unlikely to facilitate it. Our results confirm the disclosure result but reverse the results on both liability standards and public enforcement. We use securities regulators' resources to proxy for regulatory intensity of the securities regulator. When we do, financial depth regularly, significantly, and robustly correlates with stronger public enforcement. In horse races between these resource-based measures of public enforcement intensity and the most common measures of private enforcement, public enforcement is overall as important as disclosure in explaining financial market outcomes around the world and more important than private liability rules. Hence, policymakers who reject public enforcement as useful for financial market development are ignoring the best currently-available evidence.

Keywords: investor protection, public enforcement, private enforcement, securities regulation

JEL Classification: D21, G14, G18, G24, G28, G32, G34, G38, K22

Suggested Citation

Jackson, Howell Edmunds and Roe, Mark J., Public and Private Enforcement of Securities Laws: Resource-Based Evidence (March 16, 2009). Journal of Financial Economics (JFE), Vol. 93, 2009, Harvard Public Law Working Paper No. 0-28, Harvard Law and Economics Discussion Paper No. 638, Available at SSRN: or

Howell Edmunds Jackson

Harvard Law School ( email )

Griswald 402
1563 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-5466 (Phone)
617-495-5156 (Fax)

Mark J. Roe (Contact Author)

Harvard Law School ( email )

Griswold 502
Cambridge, MA 02138
United States
617-495-8099 (Phone)
617-495-4299 (Fax)

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