Law and Finance in Emerging Economies: Germany and Britain 1800-1913

Modern Law Review 80(3) 2016

41 Pages Posted: 12 Jun 2015 Last revised: 24 Oct 2016

See all articles by Carsten Gerner-Beuerle

Carsten Gerner-Beuerle

University College London - Faculty of Laws; University of Notre Dame - Notre Dame Law School; European Corporate Governance Institute (ECGI)

Date Written: August 23, 2016

Abstract

By most standards, Britain in the 19th century was the leading financial nation in the world, possessing more developed capital markets than any other country. An influential view in the law and finance literature argues that holding macroeconomic factors constant, this difference in financial development can be attributed to more stringent disclosure regulation in Britain. This article compares Britain with another European country that was at the centre of the industrial transformation in the 19th century: Germany. It presents a more granular analysis of regulatory reform than is available elsewhere in the literature and presents findings that are, in several respects, at variance with the orthodox view in law and finance. The level of disclosure regulation was largely comparable in both countries during the period under investigation. Furthermore, reform of disclosure regulation was not an exogenous stimulus of financial development, but evolved incrementally and in response to changing market conditions. This was different with respect to the legal regime governing the formation of stock corporations. Here, the two countries developed in diametrically opposed directions as a result of concerted efforts by the policy maker to effect changes in market conditions. The article argues that these rules stand out as the most striking difference between Germany and the UK, a difference that was relevant to organisational choice and types of finance available to the entrepreneur.

Keywords: Law and finance; financial development; disclosure regulation; private enforcement; liability for incorrect disclosures

JEL Classification: G38, K22, N43, P51

Suggested Citation

Gerner-Beuerle, Carsten, Law and Finance in Emerging Economies: Germany and Britain 1800-1913 (August 23, 2016). Modern Law Review 80(3) 2016, Available at SSRN: https://ssrn.com/abstract=2617231 or http://dx.doi.org/10.2139/ssrn.2617231

Carsten Gerner-Beuerle (Contact Author)

University College London - Faculty of Laws ( email )

Bentham House
4-8 Endsleigh Gardens
London, WC1E OEG
United Kingdom

HOME PAGE: http://https://www.ucl.ac.uk/laws/people/carsten-gerner-beuerle

University of Notre Dame - Notre Dame Law School ( email )

Eck Hall of Law
Notre Dame, IN 46556
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/carsten-gerner-beuerle

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