The importance of legal systems for portfolio investment in the developing world

Hoon Lee, Joseph L. Staats and Glen Biglaiser
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Hoon Lee: Texas Tech University, USA
Joseph L. Staats: University of Minnesota, USA
Glen Biglaiser: University of North Texas, USA

International Area Studies Review, 2012, vol. 15, issue 4, 339-358

Abstract: Building on recent works showing the role that legal institutions can play in attracting foreign investment to developing countries, and drawing on insights obtained from Powell and Rickard ( International Interactions 36: 335–362, 2010), we demonstrate that developing countries with common law legal systems attract greater portfolio investment than countries that have civil law or Islamic legal systems because common law systems are more inclined to promote the rule of law and protect property rights and can be understood to provide more efficiency in the law, better contract enforcement, more judicial autonomy and more market-oriented regulations. We base our findings on an analysis of time-series panel data for 99 countries covering the period 1980–2007.

Keywords: Portfolio investment; legal systems; common law; rule of law; property rights (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:sae:intare:v:15:y:2012:i:4:p:339-358

DOI: 10.1177/2233865912465604

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