The legal and institutional preconditions for strong securities markets

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222 Scopus citations


An important challenge for all economies, at which only a few have succeeded, is creating the preconditions for a strong market for common stocks and other securities. A strong securities market rests on a complex network of legal and market institutions that ensure that minority shareholders (1) receive good information about the vaiue of a company's business and (2) have confidence that a company's managers and controlling shareholders won't cheat them out of most or all of the value of their investment. A country whose laws and related institutions fail on either count cannot develop a strong securities market, forcing firms to rely on internal financing or bank financing - both of which have important shortcomings. In this Article, Professor Bernard Black explains why these two investor protection issues are critical, related, and hard to solve. He discusses which laws and institutions are most important for each, which of these laws and institutions can be borrowed from countries with strong securities markets, and which must be homegrown.

Original languageEnglish (US)
Pages (from-to)781
Number of pages1
JournalUCLA Law Review
Issue number4
StatePublished - Apr 2001

ASJC Scopus subject areas

  • Law


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