This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

Law and Finance

This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common-law countries generally have the strongest, and Frenchcivil-law countries the weakest, legal protections of investors, with German- and Scandinavian-civil-law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

A Survey of Corporate Governance

This article surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. CORPORATE GOVERNANCE DEALS WITH the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. How do the suppliers of finance get managers to return some of the profits to them? How do they make sure that managers do not steal the capital they supply or invest it in bad projects? How do suppliers of finance control managers? At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterward. The professional managers or entrepreneurs who run the firms might as well abscond with the money. Although they sometimes do, usually they do not. Most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance. But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved. In fact, the subject of corporate governance is of enormous practical impor

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This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3- to 12-month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented

/pdf/returns-to-buying-winners-and-selling-losers-implications-47r2et8t86.pdf

Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the "dynamic vitality" of free enterprise. The great economists of the 1930s and 1940s failed to see the dangers of socialism in part because they focused on the role of prices under socialism and capitalism, and ignored the enormous importance of ownership as the source of capitalist incentives to innovate. Moreover, many of the concerns that private firms fail to address "social goals" can be addressed through government contracting and regulation, without resort to government ownership. The case for private provision only becomes stronger when competition between suppliers, reputational mechanisms, the possibility of provision by private not-for-profit firms, as well as political patronage and corruption, are brought into play.

State Versus Private Ownership

We establish five facts about the informal economy in developing countries. First, it is huge, reaching about half of the total in the poorest countries. Second, it has extremely low productivity compared to the formal economy: informal firms are typically small, inefficient, and run by poorly educated entrepreneurs. Third, although avoidance of taxes and regulations is an important reason for informality, the productivity of informal firms is too low for them to thrive in the formal sector. Lowering registration costs neither brings many informal firms into the formal sector, nor unleashes economic growth. Fourth, the informal economy is largely disconnected from the formal economy. Informal firms rarely transition to formality, and continue their existence, often for years or even decades, without much growth or improvement. Fifth, as countries grow and develop, the informal economy eventually shrinks, and the formal economy comes to dominate economic life. These five facts are most consistent with dual models of informality and economic development.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w20205.pdf?abstractid=2448910&mirid=1

Informality and Development

Schumpeter Lecture: Government in Transition

Russia's international behavior during the last decade has puzzled many U.S. observers. As seen from Washington, the greatest challenges of the moment?terrorism, nuclear proliferation, climate change?are global ones that threaten all states. The United States has been trying to organize multilateral responses. Yet the Kremlin has proved singularly unhelpful. For years, Russian negotiators have stalled efforts to compel Iran and North Korea to give up their nuclear weapons programs. Meanwhile, Moscow has applied economic and diplomatic pressure to keep nearby states from joining nato or letting U.S. troops use their bases to fight the Taliban in Afghanistan. And in August 2008, Russia invaded Georgia and effectively detached two mountain enclaves from its territory. More recently, some have seen hints of a thaw in U.S.-Russian relations. Last June, U.S. President Barack Obama and Russian President Dmitry Medvedev chatted over hamburgers in Washington and announced that their countries' relationship had been "reset." Moscow signed a new treaty to replace the expiring Strategic Arms Reduction Treaty (start) and backed a un resolution tightening sanctions on Iran.

Why Moscow Says No: A Question of Russian Interests, Not Psychology

We use a newly assembled sample of 1,503 regions from 82 countries to compare the speed of per capita income convergence within and across countries. Regional growth is shaped by similar factors as national growth, such as geography and human capital. Regional convergence is about 2.5% per year, not more than 1% per year faster than convergence between countries. Regional convergence is faster in richer countries, and countries with better capital markets. A calibration of a neoclassical growth model suggests that significant barriers to factor mobility within countries are needed to account for the evidence.

Andrei Shleifer

Papers

State Versus Private Ownership

Informality and Development

Schumpeter Lecture: Government in Transition

Why Moscow Says No: A Question of Russian Interests, Not Psychology

Growth in Regions