Law and Finance c. 1900

Abstract

How persistent are the effects of legal institutions adopted or inherited in the distant past? A substantial literature argues that legal origins have persistent effects that explain clear differences in investor protections and financial development around the world today (La Porta et al, 1998, 1999 and passim). This paper examines the persistence of the effects of legal origins by examining new estimates of different indicators of financial development in more than 20 countries in 1900 and 1913. The evidence presented does not yield robust results that can sustain the hypothesis of persistence effects of legal origin, but it is not powerful enough to reject it either. Then the paper examines if there were systematic differences in the extent of investor protections across countries, since that is the main channel through which legal origin affects financial development, and shows that all the evidence supports the idea of relative convergence in corporate governance practices across legal families circa 1900. The paper concludes that, if the evidence presented is representative, the variation observed in financial development around the world today is likely a product of events of the twentieth century rather than a consequence of long-term (and persistent) differences occasioned by legal traditions.

A global corporate census: publicly traded and close companies in 1910

“…Rajan and Zingales, ‘Great reversals’; La Porta, Lopez‐de‐Silanes, and Shleifer, ‘Economic consequences’; Musacchio, ‘Law’; Dimson, March, and Staunton, Triumph ; eisdem, Credit Suisse ; Moore, ‘World financial markets’.…”

Law, Economics and History: Endogenous Institutional Change and Legal Innovation

“…12 See Herrmann, Thöni & Gächter 2008. 13 A similar criticism is proposed by those contributions showing that the initial 'legal origins' codification was picking a correlation between specific features of colonization -like human capital and the enforcement of property rights -and economic development (Perotti & Von Thadden 2006;Garoupa & Gomez Liguerre 2010;Musacchio 2010). 14 Another dimension determining the overall quality of the law is the degree of government centralization.…”

The Political Economy of Financial Systems: Evidence from Suffrage Reforms in the Last Two Centuries

“…The first is the stock market capitalisation to GDP (Stock Market Capitalisation). We combine several data sources to obtain the longest time series possible (1830–1999), including Goldsmith (), Rajan and Zingales () and Musacchio (). We mainly rely on data provided by Rajan and Zingales () for which the stock market capitalisation to GDP is available for specific years between 1913 and 1999 in 24 countries.…”

“…We mainly rely on data provided by Rajan and Zingales () for which the stock market capitalisation to GDP is available for specific years between 1913 and 1999 in 24 countries. Musacchio () proposes improved estimates for 1913 and complements it with 1900, as Sylla () and La Porta et al . () had questioned the accuracy of Rajan and Zingales's figures in 1913, arguing that the inclusion of corporate bonds and cross‐listed companies produced poor estimates in 1913.…”

“…() had questioned the accuracy of Rajan and Zingales's figures in 1913, arguing that the inclusion of corporate bonds and cross‐listed companies produced poor estimates in 1913. We therefore employ the re‐estimated data of Musacchio () for the years 1900 and 1913 and the data of Rajan and Zingales () for the following years. Goldsmith () provides additional data on stock market capitalisation to GDP for the nineteenth century but for fewer countries.…”