Is There a Relationship Between Shareholder Protection and Stock Market Development?

Deakin, Simon; Sarkar, Prabirjit; Siems, Mathias

doi:10.1561/108.00000025

Is There a Relationship Between Shareholder Protection and Stock Market Development?

Deakin, Simon; Sarkar, Prabirjit; Siems, Mathias

Authors

Simon Deakin

Prabirjit Sarkar

Mathias Siems

Abstract

The paper uses recently created datasets measuring legal change over time in a sample of 28 developed and emerging economies to test whether the strengthening of shareholder rights in the course of the mid-1990s and 2000s promoted stock market development in those countries. It finds only weak and equivocal evidence of a positive effect of shareholder protection on market capitalisation, the value of stock trading, and the turnover ratio, and a negative impact on the number of listed companies. There is stronger evidence of reverse causality, in the sense of stock market development at country level generating changes in shareholder protection law. We conclude, firstly, that legal reforms were at least in part an endogenous response to stock market development and not simply a reaction to the generation of global standards; but, secondly, that the laws passed in response to the demand for shareholder empowerment did not consistently have the expected impact on financial markets, and may have had some negative and perverse results.

Citation

Deakin, S., Sarkar, P., & Siems, M. (2018). Is There a Relationship Between Shareholder Protection and Stock Market Development?. Journal of law, finance and accounting, 3(1), 115-146. https://doi.org/10.1561/108.00000025

Journal Article Type	Article
Acceptance Date	Nov 13, 2017
Online Publication Date	May 31, 2018
Publication Date	May 31, 2018
Deposit Date	Jun 4, 2018
Publicly Available Date	Nov 30, 2018
Journal	Journal of law, finance, and accounting.
Print ISSN	2380-5005
Electronic ISSN	2380-5013
Publisher	Now Publishers
Peer Reviewed	Peer Reviewed
Volume	3
Issue	1
Pages	115-146
DOI	https://doi.org/10.1561/108.00000025
Related Public URLs	https://www.repository.cam.ac.uk/handle/1810/273280