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Law and finance (1998)
| Venue: | Journal of Political Economy |
| Citations: | 1443 - 19 self |
BibTeX
@ARTICLE{Porta98lawand,
author = {Rafael La Porta and Florencio Lopez-de-silanes and Andrei Shleifer and Robert W. Vishny and Bernard Black and Bertyl G. Bylund and Francesco Denozza and Yoshikata Fukui and Zvi Griliches and Oliver Hart and Martin Hellwig and James Hines and Louis Kaplow and Raghu Rajan and Roberta Romano and Rolf Skog and Eddy Wymeersch and Luigi Zingales},
title = {Law and finance},
journal = {Journal of Political Economy},
year = {1998},
pages = {1113--1155}
}
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Abstract
This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the qual-ity of their enforcement in 49 countries. The results show that common-law countries generally have the strongest, and French-civil-law countries the weakest, legal protections of investors, with German- and Scandinavian-civil-law countries located in the mid-dle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protec-tions, consistent with the hypothesis that small, diversified share-holders are unlikely to be important in countries that fail to protect their rights. I. Overview of the Issues In the traditional finance of Modigliani and Miller (1958), securities are recognized by their cash flows. For example, debt has a fixed promised stream of interest payments, whereas equity entitles its
