Law, Finance, and Politics: The Case of India
AbstractThe process of liberalisation of India's economy since 1991 has brought with it considerable development both of its financial markets and the legal institutions which support these. An influential body of recent economic work asserts that a country's 'legal origin'-as a civilian or common law jurisdiction-plays an important part in determining the development of its investor protection regulations, and consequently its financial development. An alternative theory claims that the determinants of investor protection are political, rather than legal. We use the case of India to test these theories. We find little support for the idea that India's legal heritage as a common law country has been influential in speeding the path of regulatory reforms and financial development. There is a complementarity between (i) India's relative success in services and software, (ii) the relative strength of its financial markets for outside equity, as opposed to outside debt, and (iii) the relative success of stock market regulation, as opposed to reforms of creditor rights. We conclude that political explanations have more traction in explaining the case of India than do theories based on 'legal origins'.
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Bibliographic InfoPaper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp361.
Date of creation: Mar 2008
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India; Law and Finance; Investor Protection; Economic structure and financial structure;
Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-CWA-2008-06-21 (Central & Western Asia)
- NEP-DEV-2008-06-21 (Development)
- NEP-LAW-2008-06-21 (Law & Economics)
- NEP-POL-2008-06-21 (Positive Political Economics)
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- Deakin, Simon & Demetriades, Panicos & James, Gregory A., 2010.
"Creditor protection and banking system development in India,"
Elsevier, vol. 108(1), pages 19-21, July.
- Gregory James & Simon Deakin & Panicos Demetriades, 2009. "Creditor Protection and Banking System Development in India," Discussion Paper Series 2009_12, Department of Economics, Loughborough University, revised Aug 2009.
- Simon Deakin & Panicos Demetriades & Gregory James, 2008. "Creditor Protection and Banking System Development in India," Discussion Papers in Economics 08/25, Department of Economics, University of Leicester.
- Simon Deakin & Panicos Demetriades & Gregory James, 2008. "Creditor Protection and Banking System Development in India," WEF Working Papers 0038, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
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