La Porta, Lopez-de-Silanes, and Shleifer are from Harvard University, and Vishny is from the University of Chicago. We are grateful to Alex Chang, Mark Chen, and Magdalena Lopez-Morton for research assistance, to Ed Glaeser, Stewart Myers, and Luigi Zingales for helpful comments, and to the HIID and the National Science Foundation for support of this research.
Legal Determinants of External Finance
Article first published online: 18 APR 2012
1997 The American Finance Association
The Journal of Finance
Volume 52, Issue 3, pages 1131–1150, July 1997
How to Cite
LA PORTA, R., LOPEZ-DE-SILANES, F., SHLEIFER, A. and VISHNY, R. W. (1997), Legal Determinants of External Finance. The Journal of Finance, 52: 1131–1150. doi: 10.1111/j.1540-6261.1997.tb02727.x
- Issue published online: 18 APR 2012
- Article first published online: 18 APR 2012
Using a sample of 49 countries, we show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries.