Handbook of the Economics of Finance

Chapter 6

Law and Finance After a Decade of Research^{* **}

Rafael La Porta^a, Florencio Lopez-de-Silanes^b and Andrei Shleifer^c

^aTuck School of Business at Dartmouth, USA

^bEDHEC Graduate School of Management, France

^cHarvard University, USA

Abstract

In the last dozen years, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. Much of this research has dealt with rules governing investor protection and their effects on financial markets. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. ...