Munich Personal RePEc Archive

Law, Finance and Development: Further Analyses of Longitudinal Data

Sarkar, Prabirjit and Singh, Ajit (2009): Law, Finance and Development: Further Analyses of Longitudinal Data. Published in: Centre for Business Research Working Paper Series No. WP387 (June 2009)

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Abstract

This paper analyses a longitudinal dataset on legal protection of shareholders over a 36 year period, 1970-2005 for four advanced countries, UK, France, Germany and the US. It examines two aspects of the legal origin hypothesis - whether shareholder protection is higher in the common law countries (UK and USA) than in the civil law countries (France and Germany) and whether shareholder protection matters for stock market development in the short and long runs. It also examines the ‘causation’ issue and the ‘endogeneity’ problem- whether greater shareholder protection leads to stock market development or whether stock market development leads to changes in law. The paper casts serious doubt on the validity of the basic theses of the Anglo Saxon legal and developmental model.

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