In July of 1826, several prominent Wall Street firms abruptly went bankrupt, amid scandalous revelations of fraudulent financial practices by their management. Although mostly forgotten today, these events represented a watershed in the early development of the corporation laws and investor protections governing Wall Street: in the aftermath of the scandals, New York State enacted an extensive package of legislation designed to protect the interests of investors. These statutes were some of the the very first of their kind, and had a lasting influence. This paper analyzes the causes of the failures, and the evolution of the law in response. The analysis highlights the critical role played by scandal-driven legislation in the evolution of investor protections and financial regulations.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14892.
Length: Date of creation: Apr 2009 Date of revision: Handle: RePEc:nbr:nberwo:14892
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Find related papers by JEL classification: G01 - Financial Economics - - General - - - Financial Crises G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation G3 - Financial Economics - - Corporate Finance and Governance K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913 N81 - Economic History - - Micro-Business History - - - U.S.; Canada: Pre-1913
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Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999.
"Corporate Ownership Around the World,"
Journal of Finance,
American Finance Association, vol. 54(2), pages 471-517, 04.
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