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The importance of legal systems for portfolio investment in the developing world

Author

Listed:
  • Hoon Lee

    (Texas Tech University, USA)

  • Joseph L. Staats

    (University of Minnesota, USA)

  • Glen Biglaiser

    (University of North Texas, USA)

Abstract

Building on recent works showing the role that legal institutions can play in attracting foreign investment to developing countries, and drawing on insights obtained from Powell and Rickard ( International Interactions 36: 335–362, 2010), we demonstrate that developing countries with common law legal systems attract greater portfolio investment than countries that have civil law or Islamic legal systems because common law systems are more inclined to promote the rule of law and protect property rights and can be understood to provide more efficiency in the law, better contract enforcement, more judicial autonomy and more market-oriented regulations. We base our findings on an analysis of time-series panel data for 99 countries covering the period 1980–2007.

Suggested Citation

  • Hoon Lee & Joseph L. Staats & Glen Biglaiser, 2012. "The importance of legal systems for portfolio investment in the developing world," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 15(4), pages 339-358, December.
    • Handle: RePEc:sae:intare:v:15:y:2012:i:4:p:339-358
    DOI: 10.1177/2233865912465604
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    References listed on IDEAS

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