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The Politics of Legal Reform

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  • Florencio Lopez-de-Silanes

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Abstract

As a result of the emerging market crises of the last decade and a large body of academic research on the influence of investor protection in the development of capital markets and economic growth, there is a growing consensus that reforming the legal infrastructure supporting business should be an important component of reforms in many developing countries. But the consensus is unwieldy, as there are still many forces against reform and little agreement about what constitutes feasible legal reforms. This paper has two parts. In the first, we identify the forces for and against legal reform and review the role these forces play in episodes of reform. In the second, we seek to further our understanding of what constitutes good laws and regulatory mechanisms, and more importantly how to make them enforceable in different countries. If legal reform is to succeed, the commonly advocated principles of corporate governance in the international community must be brought down to the local political and judicial realities. Translating international corporate governance initiatives into clear and enforceable rights for creditors and shareholders that incorporate these constraints will be difficult but necessary. Bankruptcy law and corporate law reform need to be politically feasible and enforceable. Legal reforms should be complemented with carefully drafted judicial reforms, as well as market-based mechanisms that foster a culture of corporate governance.

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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2002)
Issue (Month): ()
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Handle: RePEc:col:000425:008694

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Keywords: investor protection; law and reform; regulatory mechanisms; developing countries;

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References

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  1. Colin Mayer & Wendy Carlin, 1999. "Finance, Investment and Growth," Economics Series Working Papers 1999-FE-09, University of Oxford, Department of Economics.
  2. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  3. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  4. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
  5. Douglas W. Diamond, 1998. "Reputation Acquisition in Debt Markets," Levine's Working Paper Archive 602, David K. Levine.
  6. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
  7. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  9. Hart, Oliver & La Porta Drago, Rafael & Lopez-de-Silanes, Florencio & Moore, John, 1997. "A new bankruptcy procedure that uses multiple auctions," European Economic Review, Elsevier, vol. 41(3-5), pages 461-473, April.
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Cited by:
  1. Peter Blair Henry & Peter Lombard Lorentzen, 2003. "Domestic Capital Market Reform and Access to Global Finance: Making Markets Work," NBER Working Papers 10064, National Bureau of Economic Research, Inc.
  2. Peter Blair Henry, 2006. "Capital account liberalization: theory, evidence, and speculation," Working Paper Series 2007-32, Federal Reserve Bank of San Francisco.
  3. Enrico Perotti & Paolo Volpin, 2004. "Lobbying on Entry," Tinbergen Institute Discussion Papers 04-088/2, Tinbergen Institute.
  4. Michael Mitsopoulos & Theodore Pelagidis, 2010. "Greek appeals courts’ quality analysis and performance," European Journal of Law and Economics, Springer, vol. 30(1), pages 17-39, August.
  5. Alberto Chong & Florencio de, 2003. "The Truth about Privatization in Latin America," Yale School of Management Working Papers ysm436, Yale School of Management.
  6. Enrico Perotti & Paolo Volpin, 2004. "Lobbying on Entry," Tinbergen Institute Discussion Papers 04-088/2, Tinbergen Institute.
  7. Eduardo Siandra, 2005. "Uruguay Capital Market: Law-in-the-books or Law-in-action?," Documentos de Trabajo (working papers) 0205, Department of Economics - dECON.
  8. Alvaro Forteza & Daniel Buquet & Mario Ibarburu & Jorge Lanzaro & Andrés Pereyra & Eduardo Siandra & Marcel Vaillant, 2003. "Understanding reform. The Uruguayan case," Documentos de Trabajo (working papers) 0603, Department of Economics - dECON.

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