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Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis

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Listed:
  • John Armour
  • Simon Deakin
  • Prabirjit Sarkar
  • Mathias Siems
  • Ajit Singh
Abstract
Using a panel data set covering a range of developed and developing countries, we show that common‐law systems were more protective of shareholder interests than civil‐law ones in the period 1995–2005. However, civilian systems were catching up, suggesting that legal origin was not much of an obstacle to formal convergence in shareholder protection law. We find no evidence of a positive impact of these legal changes on stock market development. Possible explanations are that laws have been overly protective of shareholders and that transplanted laws have not worked well in contexts for which they were not suited.

Suggested Citation

  • John Armour & Simon Deakin & Prabirjit Sarkar & Mathias Siems & Ajit Singh, 2009. "Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 6(2), pages 343-380, June.
    • Handle: RePEc:wly:empleg:v:6:y:2009:i:2:p:343-380
    DOI: 10.1111/j.1740-1461.2009.01146.x
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    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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