Law and Finance: Common Law and Civil Law Countries Compared?An Empirical Critique

AbstractThough the idea that formal institutions of corporate governance matter for economic development is widely accepted, it is still a matter of debate why different systems of corporate governance are dominant in different countries. While the “law-and-finance-view” asserts that the country′s affiliation to a certain legal family matters, other authors instead either emphasize the importance of geography, of religion and culture or of the dominance of interest groups for the institutional development of financial markets. This article surveys different views about the causes of financial development and presents empirical evidence on the question whether financial markets are really better developed in “common-lawcountries” than in “civil-law-countries”.

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Shareholder Protection in the USA and Germany - “Law and Finance” Revisited

German Law Journal ◽

10.1017/s207183220000465x ◽

2006 ◽

Vol 7 (3) ◽

pp. 257-278 ◽

Cited By ~ 25

Author(s):

Udo C Braendle

Keyword(s):

United States ◽

Common Law ◽

Civil Law ◽

German Law ◽

The United States ◽

Law And Finance ◽

Anglo Saxon ◽

Shareholder Protection ◽

The Usa

Though Company Laws of the United States and Germany have much in common, they are opposite in many important ways. While the Anglo-Saxon Law derives from Common Law, German Law has its origin in the Civil Law.La Porta et al. are not the only ones highlighting that the quality of shareholder protection varies across different jurisdictions depending on which legal system family the jurisdiction belongs. Pistor and Siems went a step further, highlighting that variations in market systems are explainable by more fundamental factors than law, like differences in the underlying ground rules.

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Legal Origins and the Financial Conservatism of Private Firms

International Journal of Economics and Finance ◽

10.5539/ijef.v11n5p103 ◽

2019 ◽

Vol 11 (5) ◽

pp. 103

Author(s):

Hongzhong Fan ◽

Mirza Nouman Ali Talib ◽

Pan Chen

Keyword(s):

Financial Crises ◽

Common Law ◽

Civil Law ◽

Private Firms ◽

Law And Finance ◽

Minority Shareholders ◽

Legal Origins ◽

Tax Shields ◽

The Difference ◽

Financial Conservatism

Following the literature of corporate law and finance, our study emphasizes on differences of legal origins and their laws influencing the capital structures of the private firms following suboptimal conservative policies. The countries considered in each legal origin represents common law countries (UK, Australia, India, Pakistan and Thailand) and Roman backed civil law countries (Japan, South Korea, Germany) respectively. The time series considered for the study is 2000-2017. The findings provide that the conservative private firms are smaller in size with less investments but are positively related with profitability in both legal origins. However, the dividend payouts and non-debt tax shields have significant positive relation with conservative policies in civil law countries. It shows that the presence of minority shareholders’ protection law in civil law countries directs the firms to pay more dividends which may also help them in reducing agency costs. We further exhibit that, before financial crises of 2008, the conservative firms in both legal origins are less directed towards dividends, especially in common law countries. Nevertheless, private conservative firms of civil law countries are more inclined towards dividend payouts after financial crises. The study implicates that the difference of laws in legal origins affect the capital structures of the conservative private firms. It further provides that because of the less effective credit markets, private firms may also be forced to adopt conservative policies in civil law countries but may also have less agency problems due to high probability of having dividend payouts.

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The Medium of Exchange in Mergers and Acquisitions: The Cases of Travel Agencies and Tour Operators

Administrative Sciences ◽

10.3390/admsci10040097 ◽

2020 ◽

Vol 10 (4) ◽

pp. 97

Author(s):

Alfredo Coelho ◽

Victor Manuel Castillo-Girón

Keyword(s):

Mergers And Acquisitions ◽

Economies Of Scale ◽

Common Law ◽

Civil Law ◽

Sunk Costs ◽

Law And Finance ◽

Investment Protection ◽

Logistics Regression ◽

Travel Agencies ◽

The Relationship

The choice of the means of exchange is one of the critical decisions in mergers and acquisitions. Travel agencies and tour operating-industries compete in a volatile environment, and in addition to generating economies of scale, investments in the industry involve important sunk costs. This paper’s focus is on the determinants of the medium of exchange in mergers and acquisitions in the travel and tour-operating industries. Previous research on the ‘law and finance’ perspectives argues that some country of origin legal systems offer better investment protection to investors. Accordingly, civil law-based systems offer weaker protection to investors when compared to common-law-based systems. For this purpose, we use a logistics regression to model the determinants of cash in a sample of 750 mergers and acquisitions by combining the research streams above. Our results provide evidence of the relationship between investor protection and the use of cash.

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SOUTHERN CROSS: CIVIL LAW AND COMMON LAW IN SOUTH AFRICA. Ed by Reinhard Zimmermann and Daniel Visser Oxford: Clarendon Press, 1996. c and 892 pp (incl index). ISBN 0 19 826087 3. £65

Edinburgh Law Review ◽

10.3366/elr.1997.1.4.501 ◽

1997 ◽

Vol 1 (4) ◽

pp. 501-506

Author(s):

George L Gretton

Keyword(s):

South Africa ◽

Common Law ◽

Civil Law

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The Evolution of a Nation

10.23943/princeton/9780691136042.001.0001 ◽

2011 ◽

Cited By ~ 11

Author(s):

Daniel Berkowitz ◽

Karen B. Clay

Keyword(s):

Political Competition ◽

Common Law ◽

Civil Law ◽

Legal Institutions ◽

Colonial History ◽

Legal Systems ◽

Water Transportation ◽

Long Run ◽

Access To Water ◽

Late Twentieth

Although political and legal institutions are essential to any nation's economic development, the forces that have shaped these institutions are poorly understood. Drawing on rich evidence about the development of the American states from the mid-nineteenth to the late twentieth century, this book documents the mechanisms through which geographical and historical conditions—such as climate, access to water transportation, and early legal systems—impacted political and judicial institutions and economic growth. The book shows how a state's geography and climate influenced whether elites based their wealth in agriculture or trade. States with more occupationally diverse elites in 1860 had greater levels of political competition in their legislature from 1866 to 2000. The book also examines the effects of early legal systems. Because of their colonial history, thirteen states had an operational civil-law legal system prior to statehood. All of these states except Louisiana would later adopt common law. By the late eighteenth century, the two legal systems differed in their balances of power. In civil-law systems, judiciaries were subordinate to legislatures, whereas in common-law systems, the two were more equal. Former civil-law states and common-law states exhibit persistent differences in the structure of their courts, the retention of judges, and judicial budgets. Moreover, changes in court structures, retention procedures, and budgets occur under very different conditions in civil-law and common-law states. This book illustrates how initial geographical and historical conditions can determine the evolution of political and legal institutions and long-run growth.

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