Working Papers - details - WEF0041
WEF0041
Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis
John Armour, Simon Deakin, Prabirjit Sarkar, Mathias Siems and Ajit Singh
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Abstract
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.