Critical Finance Review > Vol 5 > Issue 1

Law and Ownership Reexamined

Clifford G. Holderness, Boston College, USA,
Suggested Citation
Clifford G. Holderness (2016), "Law and Ownership Reexamined", Critical Finance Review: Vol. 5: No. 1, pp 41-83.

Publication Date: 12 May 2016
© 2016 C. G. Holderness
Investors’ legal protectionsLaw and financeOwnership concentration


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In this article:
1. Introduction 
2. Existing Criticisms of the Law and Ownership Literature 
3. Methodology 
4. Empirical Results 
5. Long-Run Within-Country Evidence 
6. The Theory of Law and Ownership Concentration 
7. Conclusion 


Sixteen measures of legal protections for public market investors, including the Anti-Director Rights Index, the Anti-Self- Dealing Index, and legal origins, are all unrelated to ownership concentration in a large and representative sample of firms from 32 countries. Furthermore, when laws were strengthened in a variety of countries, ownership either stayed the same or became more concentrated. The two theories behind the proposed negative relation of law and ownership concentration are inconsistent with each other and inconsistent with established empirical regularities. In sum, both the evidence and the theory are at odds with the influential proposition that large shareholdings are a response to weak legal protections for public market investors.