Questioning 'Law and Finance': US Stock Market Development, 1930-70

36 Pages Posted: 7 Jun 2012 Last revised: 15 Aug 2012

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Steven A. Bank

University of California, Los Angeles (UCLA) - School of Law

Harwell Wells

Temple University - James E. Beasley School of Law

Date Written: June 7, 2012

Abstract

An important tenet of a burgeoning 'law and finance' literature is that stock market development is contingent upon corporate law offering ample protection to shareholders. This paper addresses this claim, using as its departure point developments occurring in the United States between 1930 and 1970. We show that, contrary to what the law and finance literature would predict, the US lacked during this period and throughout the 20th century generally corporate law that provided extensive protection to shareholders. We also point out that while federal securities legislation introduced in the mid-1930s bolstered investor protection, this reform effort did not energize the stock market in the manner implied by law and finance analysis.

Keywords: law and finance, corporate law, Delaware, stock market, securities regulation

JEL Classification: G38, K22, N12

Suggested Citation

Cheffins, Brian R. and Bank, Steven A. and Wells, Harwell, Questioning 'Law and Finance': US Stock Market Development, 1930-70 (June 7, 2012). University of Cambridge Faculty of Law Research Paper No. 14/2012; UCLA School of Law, Law-Econ Research Paper No. 12-14. Available at SSRN: https://ssrn.com/abstract=2079505 or http://dx.doi.org/10.2139/ssrn.2079505

Brian R. Cheffins (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Steven A. Bank

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-794-7601 (Phone)

Harwell Wells

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States
215-204-1183 (Phone)
215-204-1185 (Fax)

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