The "law and finance theory" is an ambitious and fascinating attempt to combine insights from the theory of corporate finance, institutional economics, legal and economic history as well as the recent studies on the determinants of economic growth into an encompassing theory, thereby filling important gaps of our understanding of the ultimate causes and linkages underlying modern economic development. It argues that the legal system, which today's countries inherited from the past, is crucial in the way it is favouring – or hampering – financial development. The major conclusion of this literature is that the common law system generally provided the more favourable basis for financial development and economic growth, and on the other hand, the French branch of the civil law tradition is the least favourable in this respect. This paper identifies a number of problems that cast serious doubt on the soundness of the empirical basis generally referred to in this literature. However, our analyses support the idea that the legal tradition has pronounced effects with respect to shareholder protection. In particular, while a critical look at the indicators revealed that there is not much evidence that common law countries protect financial investors better than civil law countries, we find support for the view that investors are treated differently.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series Working papers with number
05-99.
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Find related papers by JEL classification: K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law G20 - Financial Economics - - Financial Institutions and Services - - - General P00 - Economic Systems - - General - - - General
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, .
"Legal Determinants of External Finance,","
CRSP working papers
324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997.
" Legal Determinants of External Finance,"
Journal of Finance,
American Finance Association, vol. 52(3), pages 1131-50, July.
[Downloadable!] (restricted)
Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998.
"Law and Finance,"
Journal of Political Economy,
University of Chicago Press, vol. 106(6), pages 1113-1155, December.
[Downloadable!] (restricted)
Other versions:
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.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)