Law and Finance : Why Does Legal Origin Matter?
A growing body of work suggests that cross-country differences in legal origin help explain differences in financial development. The authors assess two theories of why legal origin influences financial development. First, the "political"...
| Main Authors: | , , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2002/10/2032625/law-finance-legal-origin-matter http://hdl.handle.net/10986/19215 |
| Summary: | A growing body of work suggests that
cross-country differences in legal origin help explain
differences in financial development. The authors assess two
theories of why legal origin influences financial
development. First, the "political" channel
stresses that (1) legal traditions differ in the priority
they give to the rights of individual investors compared
with the state, and that (2) this has repercussions for the
development of property rights and financial markets.
Second, the "adaptability" channel holds that (1)
legal traditions differ in their ability to adjust to
changing commercial circumstances, and (2) legal systems
that adapt quickly to minimize the gap between the
contracting needs of the economy and the legal system's
capabilities will foster financial development more
effectively than would more rigid legal traditions. The
authors use historical comparisons and cross-country
regressions to assess the validity of these two channels. |
|---|