Journal
JOURNAL OF COMPARATIVE ECONOMICS
Volume 31, Issue 4, Pages 653-675Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jce.2003.08.001
Keywords
law; financial development
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Beck, Thorsten, Demirguc-Kunt, Asli, and Levine, Ross - Law and finance: why does legal origin matter? This paper assesses empirically two theories of why legal origin influences financial development. The political channel stresses that legal traditions differ in the priority they give to the rights of individual investors vis-a-vis the state and this has repercussions for financial development. The adaptability channel holds that legal traditions differ in their ability to adjust to changing commercial circumstances and legal systems that adapt quickly will foster financial development more effectively. We use historical comparisons and cross-country regressions to assess the validity of these two channels. We find that legal origin matters for financial development because legal traditions differ in their ability to adapt efficiently to evolving economic conditions (C) 2003 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.
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