While numerous factors play into whether a country has a dynamic financial market, there’s one in particular that stands out. Mauro Guillen, director of The Lauder Institute at Penn and professor of management at Wharton, finds that countries that offer a legal framework to protect minority shareholders tend to have more robust markets because investors are more willing to take risks.
In their paper, “State Capacity, Minority Shareholder Protections, and Stock Market Development,” Guillen and INSEAD professor Laurence Capron evaluated current and historical legislation in more than 70 countries with both established and emerging markets and found that it’s not enough for countries to have legal provisions in place. There also must be a mechanism for enforcement for these provisions to be most effective. While the data is important for policy makers, it also matters to everyday citizens who want to make informed decisions about investing. More: http://knlg.net/1JPQu5C