NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Law and Finance

Rafael La Porta, Florencio Lopez-de-Silane, Andrei Shleifer, Robert W. Vishny

NBER Working Paper No. 5661
Issued in July 1996
NBER Program(s):   CF

This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

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Published: Journal of Political Economy, Vol. 106, no. 6 (1998): 1113-1155.

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