Law and Finance
This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that commonâ€law countries generally have the strongest, and french civil law countries the weakest, legal protections of investors, with Germanâ€-and Scandinavianâ€-civilâ€law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareâ€holders are unlikely to be important in countries that fail to protect their rights.
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