Analyzing 'Shareholder Protection and Stockmarket Development: An Empirical Test of the Legal Origins Hypothesis' by Armour, Deakin, Sarkar, Siems and Singh
7 Pages Posted: 23 Jan 2014
Date Written: January 23, 2014
Abstract
Critical analysis of the journal article “Shareholder protection and stockmarket development: an empirical test of the legal origins hypothesis”, written by Armour, Deakin, Sarkar, Siems and Singh. This article contributes to the literature that “legal origins” have a significant effect on shareholder protection rules development. The seminal research work of La Porta et al. in 1998 that focussed on this subject and claimed that common law systems has better shareholder protection rules compared to their counterpart civilian law systems has been hugely debated in the scholarly circles for long. However, there was not any conclusive research work conducted to question the claim of La Porta et al. or to substantiate the same. This article contributes richly to the literature by stating that common law systems does hold a strong position in terms of development of shareholder protection laws compared to civil law systems for the time period 1995-2005. This work focuses on 20 different countries from civil law systems, common law systems, developing, developed and under-developed countries to draw comparison of the development of law in these countries and the different considerations that regulated the development of law. The authors also conclude that shareholder protection does not really help in stock market development because within the given period under review there was no connection between the extent of legal protection of shareholders and the financial development of countries.
Keywords: legal origins theory, shareholder protection, stock market development, La Porta, Armour
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