IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Law and Financial Development: What we are learning from time-series evidence

Listed author(s):
  • Armour, J.
  • Deakin, S.
  • Mollica, V.
  • Siems, M.M.

The legal origins hypothesis is one of the most important and influential ideas to emerge in the social sciences in the past decade. However, the empirical base of the legal origins claim has always been contestable, as it largely consists of cross-sectional datasets which provide evidence on the state of the law only at limited points in time. There is now a growing body of data derived from techniques for coding cross-national legal variation over time. This time-series evidence is reviewed here and is shown to cast new light on some of the central claims of legal origins theory. Legal origins are shown to be of little help in explaining trends in the law relating to shareholder protection, although the classification of legal systems into English-, French- and German-origin ‘families’ has greater explanatory force in the context of creditor rights. The widely-held view that increases in shareholder rights foster financial development is not supported by time-series analyses. More generally, the new evidence casts doubt on the suggestion that legal origins operate as an ‘exogenous’ force, independently shaping both the content of laws and economic outcomes. It is more plausible to see legal systems as evolving in parallel with changes in economic conditions and political structures at national level.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp399.pdf
Download Restriction: no

Paper provided by Centre for Business Research, University of Cambridge in its series Working Papers with number wp399.

as
in new window

Length:
Date of creation: Mar 2010
Handle: RePEc:cbr:cbrwps:wp399
Note: PRO-2
Contact details of provider: Web page: http://www.cbr.cam.ac.uk

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.:

as
in new window


  1. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, "undated". "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
  2. Mathias Siems, 2007. "Shareholder Protection around the World ("Leximetric II")," Working Papers wp359, Centre for Business Research, University of Cambridge.
  3. Simon Deakin & Prabirjit Sarkar, 2008. "Assessing the Long-Run Economic Impact of Labour Law Systems: A theoretical Reappraisal and Analysis of New Time Series Data," Working Papers wp367, Centre for Business Research, University of Cambridge.
  4. Edward L. Glaeser & Andrei Shleifer, 2001. "Legal Origins," Harvard Institute of Economic Research Working Papers 1920, Harvard - Institute of Economic Research.
  5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  6. Coffee, John C., Jr., 2007. "Law and the Market: The Impact of Enforcement," Working Papers 07-3, University of Pennsylvania, Wharton School, Weiss Center.
  7. Mathias M Siems, 2006. "Legal origins: reconciling law and finance and comparative law," Working Papers wp321, Centre for Business Research, University of Cambridge.
  8. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169-169.
  9. Reinhard H. Schmidt & Gerald Spindler, 2002. "Path Dependence, Corporate Governance and Complementarity," Working Paper Series: Finance and Accounting 27, Department of Finance, Goethe University Frankfurt am Main.
  10. Shleifer, Andrei & Djankov, Simeon & McLiesh, Caralee, 2007. "Private credit in 129 countries?," Scholarly Articles 27867134, Harvard University Department of Economics.
  11. Andrei Shleifer & Simeon Djankov & Edward L. Glaeser & Rafael La Porta & Florencio Lopez de Silanes, 2003. "The New Comparative Economics," Yale School of Management Working Papers ysm355, Yale School of Management.
  12. Mathias M. Siems & Michael C. Schouten, 2009. "The Evolution of Ownership Disclosure Rules across Countries," Working Papers wp393, Centre for Business Research, University of Cambridge.
  13. Simon Deakin & Priya Lele & Mathias Siems, 2007. "The Evolution of Labour Law: Calibrating and Comparing Regulatory Regimes," Working Papers wp352, Centre for Business Research, University of Cambridge.
  14. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, "undated". "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • 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.
  15. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, "undated". "What Works in Securities Laws?," Working Paper 19491, Harvard University OpenScholar.
  16. Simon Deakin & Panicos Demetriades & Gregory James, 2008. "Creditor Protection and Banking System Development in India," WEF Working Papers 0038, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  17. Armour, John & Deakin, Simon & Sarkar, Prabirjit & Siems, Mathias & Singh, Ajit, 2007. "Shareholder protection and stockmarket development: an empirical test of the legal origins hypothesis," MPRA Paper 39055, University Library of Munich, Germany.
  18. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
  19. S. Mahendra Dev, 2008. "India," Chapters, in: Handbook on the South Asian Economies, chapter 1 Edward Elgar Publishing.
  20. Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 445-470, April.
  21. Lopez-de-Silanes, Florencio & La Porta, Rafael & Shleifer, Andrei, 2008. "The Economic Consequences of Legal Origins," Scholarly Articles 2962610, Harvard University Department of Economics.
  22. Hadfield, Gillian K., 2008. "The levers of legal design: Institutional determinants of the quality of law," Journal of Comparative Economics, Elsevier, vol. 36(1), pages 43-73, March.
  23. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
  24. Kraakman, Reiner H, 1986. "Gatekeepers: The Anatomy of a Third-Party Enforcement Strategy," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(1), pages 53-104, Spring.
  25. Henry Hansmann & Reinier Kraakman, 2000. "The End Of History For Corporate Law," Yale School of Management Working Papers ysm136, Yale School of Management, revised 01 Feb 2001.
  26. Prabirjit Sarkar, 2009. "Do the English Legal Origin Countries have More Dispersed Share Ownership and More Developed Financial Systems?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 16(1), pages 73-86.
  27. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
  28. John Armour & Simon Deakin & Priya Lele & Mathias Siems, 2009. "How Do Legal Rules Evolve? Evidence from a cross-country Comparison of Shareholder, Creditor and Worker Protection," Working Papers wp382, Centre for Business Research, University of Cambridge.
  29. Cheffins, Brian R, 2001. "Does Law Matter? The Separation of Ownership and Control in the United Kingdom," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 459-484, Part I Ju.
  30. Mathias M. Siems, 2006. "Shareholder Protection Across Countries – Is the EU on the Right Track?," CESifo DICE Report, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(3), pages 39-43, October.
  31. John Armour, 2008. "The Law and Economics Debate about Secured Lending: Lessons for European LawMaking?," Working Papers wp362, Centre for Business Research, University of Cambridge.
  32. Haselmann, Rainer & Pistor, Katharina & Vig, Vikrant, 2006. "How Law Affects Lending," MPRA Paper 157, University Library of Munich, Germany.
  33. repec:hrv:faseco:30747190 is not listed on IDEAS
  34. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
  35. Hay, Jonathan R & Shleifer, Andrei, 1998. "Private Enforcement of Public Laws: A Theory of Legal Reform," American Economic Review, American Economic Association, vol. 88(2), pages 398-403, May.
  36. Mathias Siems & Priya Lele, 2006. "Shareholder Protection: A Leximetric Approach," Working Papers wp324, Centre for Business Research, University of Cambridge.
  37. Naomi R. Lamoreaux, 2005. "Legal Regime and Contractual Flexibility: A Comparison of Business's Organizational Choices in France and the United States during the Era of Industrialization," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 28-61.
  38. Priya P. Lele & Mathias M. Siems, 2007. "Diversity in Shareholder Protection in Common Law Countries," CESifo DICE Report, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(1), pages 3-9, 05.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cbr:cbrwps:wp399. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ruth Newman and Georgie Cohen)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.