The Core Institutions that Support Strong Securities Markets

48 Pages Posted: 16 Jun 2000

Date Written: June 2000


A strong securities markets rests on a complex network of supporting institutions that ensure that minority shareholders (i) receive good information about the value of a company's business, and (ii) can have confidence that a company's managers and controlling shareholders won't cheat them out of most or all of the value of their investment. A country whose laws and related institutions fail on either count cannot develop a strong stock market, forcing firms to rely on internal financing or bank financing - both of which have important shortcomings. This article explains why these two investor protection issues are critical, related, and hard to solve, and discusses which laws and institutions are most important for each.

This article is an earlier and shorter version of Bernard Black, "The Legal and Institutional Preconditions for Strong Securities Markets," UCLA Law Review, vol. 48, pp. 781-855 (2001), which is available on SSRN at

JEL Classification: G38, K22

Suggested Citation

Black, Bernard S., The Core Institutions that Support Strong Securities Markets (June 2000). Available at SSRN: or

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)


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