Is There a Relationship between Shareholder Protection and Stock Market Development?

Simon Deakin, Prabirjit Sarkar () and Mathias Siems

Working Papers from Centre for Business Research, University of Cambridge

Abstract: 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 turnover 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 reforms 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.

Keywords: corporate governance; shareholder protection; financial development; stock market development (search for similar items in EconPapers)
JEL-codes: G33 G34 K22 O16 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-cfn and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Is There a Relationship Between Shareholder Protection and Stock Market Development? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cbr:cbrwps:wp492

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