Law, Finance and Development Further Analyses of Longitudinal Data
Cambridge Journal of Economics, March, 2010
Posted: 7 Oct 2009 Last revised: 30 Jun 2011
Date Written: October 6, 2009
This paper analyses a longitudinal dataset on legal protection of shareholders over a 36 year period, 970-2005 for four advanced countries, UK, France, Germany and the US. It examines two aspects of the legal origin hypothesis - whether shareholder protection is higher in the common law countries (UK and USA) than in the civil law countries (France and Germany) and whether shareholder protection matters for stock market development in the short and long runs. It also examines the “causation” issue and the “endogeneity” problem- whether greater shareholder protection leads to stock market development or whether stock market development leads to changes in law. The paper casts serious doubt on the validity of the basic theses of the Anglo Saxon legal and developmental model.
Keywords: Shareholder protection, Corporate Governance, Stock market development, Law and Finance
JEL Classification: G3, G38, K22, K4
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