Corporate Governance and Economic Development

6 Pages Posted: 26 Apr 2005

See all articles by Troy A. Paredes

Troy A. Paredes

Washington University in St. Louis - School of Law


The law matters thesis, spearheaded by the work of La Porta, Lopez-de-Silanes, Shleifer, and Vishny, offers one important explanation for the development of thick equity markets - namely, strong legal protections that shield shareholders from insider abuses and expropriation. Assuming that law does matter, the question for developing countries is, What law? As is often the case, when considering corporate governance reforms in developing countries, attention shifts to the U.S. The U.S., after all, has the world's thickest stock markets, even after the scandals at Enron, WorldCom, and elsewhere. But is transplanting U.S. corporate governance to developing countries likely to promote equity markets and economic growth there? Put differently, to what extent should the government displace private ordering with more substantive regulation of corporate governance in developing countries? In this essay, I conclude that in most instances, developing countries should adopt a mandatory model of corporate governance, as compared to the enabling market-based approach that the U.S. (i.e., Delaware) has opted for.

Keywords: Comparative corporate governance, mandatory corporate law, Delaware, venture capital, transplant effects

Suggested Citation

Paredes, Troy A., Corporate Governance and Economic Development. Regulation, Vol. 28, No. 1, pp. 34-39, Spring 2005, Washington U. School of Law Working Paper No.05-04-04 , Available at SSRN:

Troy A. Paredes (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States
314-935-8216 (Phone)
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