Twenty Years of 'Law and Finance': Time to Take Law Seriously

50 Pages Posted: 15 Oct 2018

See all articles by Gerhard Schnyder

Gerhard Schnyder

Loughborough University London - Institute for International Management; University of Cambridge - Centre for Business Research

Mathias Siems

European University Institute (EUI); University of Cambridge - Centre for Business Research; European Corporate Governance Institute (ECGI)

Ruth V. Aguilera

Northeastern University - Department of International Business and Strategy

Date Written: March 2018

Abstract

The Law and Finance School (LFS) has become an important stream of research in management and socio-economic studies. This paper provides the first comprehensive discussion of the first twenty years of LFS literature. Drawing on legal theory, we show that, despite the centrality of law to the LFS, the LFS is based on a surprisingly ‘thin’ theory of law. It does not provide a coherent definition of what primary function law plays in the economy, what criterion makes law ‘valid’ law, and what mechanism links law to actors’ behaviours. Therefore, contrary to existing criticisms of the LFS, we argue that the main issue is not that the LFS overstates the importance of law, but rather that it does not take law seriously enough. We propose ways in which future research could develop a more solid conceptual framework to empirically investigate the impact of law on economic and social outcomes.

Keywords: law, regulation, corporate governance, theory

JEL Classification: K0, L5, O1

Suggested Citation

Schnyder, Gerhard and Siems, Mathias and Aguilera, Ruth V., Twenty Years of 'Law and Finance': Time to Take Law Seriously (March 2018). Available at SSRN: https://ssrn.com/abstract=3253880 or http://dx.doi.org/10.2139/ssrn.3253880

Gerhard Schnyder

Loughborough University London - Institute for International Management ( email )

Lesney Avenue
Here East
London, E15 2GZ
Great Britain
+44 (0)20 3805 1360 (Phone)

University of Cambridge - Centre for Business Research ( email )

Judge Business School Building
Cambridge, CB2 1AG
United Kingdom
++44 (0)1223 765325 (Phone)

HOME PAGE: http://www.cbr.cam.ac.uk/people/research-associates/gerhard-schnyder/

Mathias Siems (Contact Author)

European University Institute (EUI) ( email )

Via Bolognese 156 (Villa Salviati)
Firenze, 50139
Italy

HOME PAGE: http://www.eui.eu/siems

University of Cambridge - Centre for Business Research ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.cbr.cam.ac.uk/people/research-associates/mathias-m-siems/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/mathias-siems

Ruth V. Aguilera

Northeastern University - Department of International Business and Strategy ( email )

Boston, MA 02115
United States

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