Law, endowments, and finance

Law, endowments, and finance Using a sample of 70 former colonies, this paper assesses two theories regarding the historical determinants of financial development. The law and finance theory holds that legal traditions, brought by colonizers, differ in terms of protecting the rights of private investors vis-à-vis the state, with important implications for financial markets. The endowment theory argues that the disease environment encountered by colonizers influences the formation of long-lasting institutions that shape financial development. The empirical results provide evidence for both theories. However, initial endowments explain more of the cross-country variation in financial intermediary and stock market development. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

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Publisher
Elsevier
Copyright
Copyright © 2003 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(03)00144-2
Publisher site
See Article on Publisher Site

Abstract

Using a sample of 70 former colonies, this paper assesses two theories regarding the historical determinants of financial development. The law and finance theory holds that legal traditions, brought by colonizers, differ in terms of protecting the rights of private investors vis-à-vis the state, with important implications for financial markets. The endowment theory argues that the disease environment encountered by colonizers influences the formation of long-lasting institutions that shape financial development. The empirical results provide evidence for both theories. However, initial endowments explain more of the cross-country variation in financial intermediary and stock market development.

Journal

Journal of Financial EconomicsElsevier

Published: Nov 1, 2003

References

  • Industry growth and capital allocation
    Beck, T.; Levine, R.
  • Finance and the sources of growth
    Beck, T.; Levine, R.; Loayza, N.
  • Legal origins
    Glaeser, E.; Shleifer, A.
  • Law and finance
    La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; Vishny, R.W.
  • The quality of government
    La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; Vishny, R.W.
  • Investor protection and corporate governance
    La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; Vishny, R.W.
  • Financial markets and the allocation of capital
    Wurgler, J.

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