Working Paper: NBER ID: w5661
Authors: Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer; Robert W. Vishny
Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.
Keywords: Investor Protection; Corporate Governance; Legal Systems; Common Law; Civil Law
JEL Codes: G30; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| common law legal systems (K15) | stronger investor protections (G18) |
| civil law legal systems (K15) | weaker investor protections (G18) |
| ownership concentration (G32) | quality of investor protections (G38) |
| poor investor protections (G24) | concentrated ownership (G34) |
| legal systems (K40) | corporate governance outcomes (G38) |
| legal rules (K40) | investor behavior (G41) |
| legal rules (K40) | firm ownership structures (G32) |