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Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis

  • John Armour

    (University of Oxford)

  • Simon Deakin

    (University of Cambridge)

  • Prabirjit Sarkar

    (Jadavpur University, Kolkata)

  • Mathias Siems

    (University of Edinburgh)

  • Ajit Singh

    (University of Cambridge)

Using a panel dataset covering a range of developed and developing countries, we show that common law systems were more protective of shareholder interests than civil law ones in the period 1995-2005. However, civilian systems were catching up, suggesting that civil law origin was not much of an obstacle to convergence. We find no evidence of a long-run impact of legal change on stock market development. Possible explanations are that laws have been overly protective of shareholders; transplanted laws have not worked as expected; and, more generally, the exogenous legal origin effect is not as strong as widely supposed.

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Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0041.

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Date of creation: May 2008
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Handle: RePEc:wef:wpaper:0041
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  1. Sonja Fagernas & Prabirjit Sarkar & Ajit Singh, 2007. "Legal Origin, Shareholder Protection and the Stock Market: New Challenges from Time Series Analysis," WEF Working Papers 0023, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
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