Governing Stock Markets in Transition Economies: Lessons from China

Columbia Law and Economics Working Paper No. 262

American Review of Law and Economics, Vol. 7, No. 1, pp. 184-210, 2005

Posted: 1 Dec 2004

See all articles by Katharina Pistor

Katharina Pistor

Columbia University School of Law

Chenggang Xu

University of Hong Kong

Abstract

Jumpstarting stock markets in transition economies has proved difficult. These countries lack effective legal governance structures and face severe information problems. Yet, not all financial markets failed because of adverse conditions. Using China's initial stock market development as a case study, this paper suggests that administrative governance can substitute for formal legal governance. At the core of this governance structure was the quota system. It created incentives for regional competition and decentralized information collection at the IPO stage. It was also used to punish regions and responsible officials when companies from their regions failed as evidenced in this paper.

JEL Classification: G3, K2, K4, N2

Suggested Citation

Pistor, Katharina and Xu, Chenggang, Governing Stock Markets in Transition Economies: Lessons from China. Columbia Law and Economics Working Paper No. 262, American Review of Law and Economics, Vol. 7, No. 1, pp. 184-210, 2005, Available at SSRN: https://ssrn.com/abstract=628065 or http://dx.doi.org/10.2139/ssrn.628065

Katharina Pistor (Contact Author)

Columbia University School of Law ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-0068 (Phone)
212-854-7946 (Fax)

Chenggang Xu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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