Is There a Relationship Between Shareholder Protection and Stock Market Development?
Siems, Mathias M
Journal of Law, Finance, and Accounting
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Deakin, S., Sarkar, P., & Siems, M. M. (2018). Is There a Relationship Between Shareholder Protection and Stock Market Development?. Journal of Law, Finance, and Accounting, 3 (1), 115-146. https://doi.org/10.1561/108.00000025
We use recently created datasets measuring legal change over time in a sample of 28 developed and emerging economies to test whether the strengthening of shareholder rights in the course of the mid-1990s and 2000s promoted stock market development in those countries. We find only weak and equivocal evidence of a positive effect of shareholder protection on market capitalisation, the value of stock trading, and the turn-over ratio, and a negative impact on the number of listed companies. There is stronger evidence of reverse causality, in the sense of stock market development at country level generating changes in shareholder protection law. We conclude, firstly, that legal re-forms were at least in part an endogenous response to stock market development and not simply a reaction to the generation of global standards; but, secondly, that the laws passed in response to the demand for shareholder empowerment did not consistently have the expected impact on financial markets, and may have had some negative and perverse results.
corporate governance, shareholder protection, financial development, stock market development
Is supplemented by: https://doi.org/10.17863/CAM.506
We gratefully acknowledge funding from the ESRC’s Rising Powers and Interdependent Futures Research Programme, Project ‘Law, Development and Finance in Rising Powers’, Grant No. ES/J012491/1.
Economic and Social Research Council (ES/J012491/1)
Economic and Social Research Council (ES/P004091/1)
External DOI: https://doi.org/10.1561/108.00000025
This record's URL: https://www.repository.cam.ac.uk/handle/1810/273280