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Legal Determinants of External Finance

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  • La Porta, Rafael
  • Florencio Lopez-de-Silanes
  • Andrei Shleifer
  • Robert W. Vishny

Abstract

Using a sample of forty-nine countries, the authors show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries. Coauthors are Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. Copyright 1997 by American Finance Association.

Suggested Citation

  • 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 1131-1150, July.
  • Handle: RePEc:bla:jfinan:v:52:y:1997:i:3:p:1131-50
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    References listed on IDEAS

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    1. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    2. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    3. 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.
    4. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    5. repec:hrv:faseco:30724330 is not listed on IDEAS
    6. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    7. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1997. "Privatizing Russia," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522284.
    8. Franco Modigliani & Enrico Perotti, 1997. "Protection of minority interest and the development of security markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 519-528.
    9. Marco Pagano & Fabio Panetta & and Luigi Zingales, 1998. "Why Do Companies Go Public? An Empirical Analysis," Journal of Finance, American Finance Association, vol. 53(1), pages 27-64, February.
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    JEL classification:

    • G - Financial Economics
    • E - Macroeconomics and Monetary Economics

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