Legal traditions and initial endowments in shaping the path of financial development

Daniel Oto-Peralías; Diego Romero-Ávila

doi:10.1111/jmcb.12097

Legal traditions and initial endowments in shaping the path of financial development

Daniel Oto-Peralías, Diego Romero-Ávila

Centre for Responsible Banking and Finance

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13 Citations (Scopus)

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Abstract

This paper finds remarkable heterogeneity in the relationship between legal traditions and finance in former colonies. The effect of the British common law on financial development is conditioned by the level of initial endowments. In former colonies with low precolonial population density, the common law has promoted high financial development, but where endowments were abundant, this legal tradition has not worked well. In contrast, the effect of the French civil law on finance is invariant to endowments. British common law countries do not exhibit greater financial development levels than French civil law countries when endowments are sufficiently high.

Original language	English
Pages (from-to)	43–77
Number of pages	35
Journal	Journal of Money, Credit and Banking
Volume	46
Issue number	1
Early online date	20 Jan 2014
DOIs	https://doi.org/10.1111/jmcb.12097
Publication status	Published - Feb 2014

Keywords

Financial development
Legal origin
Endowments
Colonialism

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10.1111/jmcb.12097

Oto-Peralias-Acceptedmanuscript-JMCB-2014
© 2014 The Ohio State University. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available from Wiley Online Library at DOI: 10.1111/jmcb.12097
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abstract = "This paper finds remarkable heterogeneity in the relationship between legal traditions and finance in former colonies. The effect of the British common law on financial development is conditioned by the level of initial endowments. In former colonies with low precolonial population density, the common law has promoted high financial development, but where endowments were abundant, this legal tradition has not worked well. In contrast, the effect of the French civil law on finance is invariant to endowments. British common law countries do not exhibit greater financial development levels than French civil law countries when endowments are sufficiently high.",

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note = "The authors acknowledge financial support from the Spanish Ministry of Science and Technology through grant ECO2009-13357, the Spanish Ministry of Economics and Competitiveness through grant ECO2012-35430, and the Andalusian Council of Innovation and Science under Excellence Project SEJ-4546.",

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Legal traditions and initial endowments in shaping the path of financial development

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Keywords

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