LAW SCHOOL
CONTEMPORARY CHALLENGES
BRASILIA
UNDERGRADUATE LAW COURSE
2015
HENRIQUE SOUZA BORGES
LEGAL ASPECTS OF THE REGULATION OF FINANCIAL MARKETS:
UNIVERSITY OF BRASILIA
Machine Translated by Google to obtain the degree of Bachelor of Laws from the
HENRIQUE SOUZA BORGES
Faculty of Law of the University of Brasilia –
2015
LEGAL ASPECTS OF THE REGULATION OF FINANCIAL MARKETS:
UnB.
CONTEMPORARY CHALLENGES
Advisor: Prof. Dr Marcus Faro de Castro
Monograph presented as partial requirement
I
BRASILIA
Machine Translated by Google Advisor
made up of the following professors:
Member
Brasilia, December 2, 2015.
Monograph presented as a partial requirement to obtain the Bachelor of Law degree from
Member
Faculty of Law of the University of Brasília (UnB) and approved by the examining board
Professor Doctor Paulo Burnier da Silveira
HENRIQUE SOUZA BORGES
CONTEMPORARY CHALLENGES LEGAL ASPECTS OF FINANCIAL MARKETS REGULATION:
Professor Ana de Oliveira Frazão
Professor Doctor Marcus Faro de Castro
II
Machine Translated by Google To my father.
.
III
Machine Translated by Google I am also grateful to my family, who always renew my soul with sincere looks,
I thank Eduardo, my partner on long study afternoons. thanks for
And I thank the reader, you brighten this work.
academic advice, as well as for the words of support regarding the stubborn insecurities that I
It greatly inspired me on the path of economic law and helped me in researching and writing this
I thank my mother, my example of determination and passion for life, and my father,
work.
support and guide me. my safe haven and wise guide on the paths of this world. I owe them the education and love that
tight hugs and shared laughter. My dear uncles and aunts, cousins and cousins, the
THANKS
Brasilia. In particular, I thank my advisor, Prof. Dr. Marcus Faro de Castro, who I extend my gratitude to the masters I had at the Faculty of Law of the University of
Always welcoming is the sap that nourishes me.
accompanied on this journey.
IV
Machine Translated by Google V
We refuse to believe that there are insufficient funds
in the great vaults of opportunity….
a check that will give us upon demand the riches of freedom and the security of justice."
Martin Luther King, 1969.
"We refuse to believe that the bank of justice is bankrupt.
And so, we've come to cash this check,
Machine Translated by Google this domain. On the one hand, the outbreak of events such as the 2008 financial crisis undermines the
functioning of financial markets. Pistor (2012) argues that the known literature
Keywords: Regulation of financial markets; Law and Finance; New Law and
how “law and finance” dominates discussions of the purpose of law in regulating the
Development; Legal Analysis of Economic Policy; Legal Theory of Finance.
their influences is still the subject of intense global academic debate. This monograph is
led by jurists who, more than highlighting systemic asymmetries, seek to offer
objective is to analyze the main theories that intend to explain the role of law in relation to
international level, but also more cohesive with the imperatives of social and economic justice. regulatory responses not only more consistent with the current profile of the financial system
confidence in the efficiency of markets, the current regulatory architecture and current models
SUMMARY
development and economic growth, the way in which this relationship is structured and exerts While there is little doubt about the influence of law on the promotion of
of corporate governance of the financial system. On the other hand, multidisciplinary analyzes emerge
global financial system and on a national scale. However, contemporary reality challenges
SAW
Machine Translated by Google events such as the 2008 financial crisis undermines confidence in market's efficiency, the
markets. Pistor (2012) argues that the Law and Finance literature dominates the discussions
Keywords: Financial markets regulation; Law and Finance; New Law and Development; Cool
about the purpose of the law in regulating the global financial system and also on a national
Analysis of Economic Policies; Legal Theory of Finance.
economy is still a matter of intense global academic debate. This paper aims to analyze the
than highlight systemic imbalances, seek to provide regulatory responses not only more
main theories that try to explain the role of law in relation to the functioning of the financial
with the imperatives of social and economic justice. consistent with the current profile of the international financial system, but also more cohesive
current regulatory architecture and the prevailing models of corporate governance of the
ABSTRACT
economic growth, how this relationship is structured and how law exerts its influence over Although there is little doubt about the influence of law on the promotion of development and
financial system. On the other, there are multidisciplinary analysis led by lawyers who, more
scale. But the contemporary reality challenges that domain. On the one hand, the emergence of
VII
Machine Translated by Google LIST OF FIGURES
Figure 3 - Graphical overview of the Positional Analysis
Figure 4 – New contractual analysis
Figure 1 - Associations between Legal Institutions and Economic Institutions according to
Figure 5 – Transnational transmission of economic policy changes
Law and Finance literature
Figure 6 – Dynamics of expansion and contraction of the monetary system
Figure 2 - Interpretation of the theory of origins as an explanatory theory
VIII
Figure 7 - Empirical evidence of the Legal Theory of Finance
Machine Translated by Google 3. ALTERNATIVE THEORETICAL APPROACHES................................................ ..................60
1.3. Methodology ..................................................................... .................................................................. ............16
-
REFERENCES ..................................................... .................................................................. ..................94
-
DOMINANT THEORETICAL FRAMEWORK: LAW AND FINANCE..................................................18
1.1. Theme .................................................................. .................................................................. .....................10
3.3. Legal Theory of Finance (Law in Finance) .....................76
1.2. Justification ..................................................................... .................................................................. .............11
-
FINAL CONSIDERATIONS ..................................................... ................................................................91
-
SOME EVALUATIONS.................................................. .................................................................. 84
3.1. New Law and Development ..................................... 60
SUMMARY
- INTRODUCTION................................................. .................................................................. .............10
3.2. Legal Analysis of Economic Policy ................................................... ...........................69
2.1. Theory of Origins ................................................................ .................................................................. ..24
2.2.1. Quantification of the right: debates on measurement and reductionism...............24 2.2.2. Legal families:
systematization and obsolescence of the debate.................................33 2.2.3. Expansion of the concept of
origins: social control and ideological nature..............40 2.2.4. Impact of law: economic performance and
varieties of capitalism.............44 2.2. Tripartite Interpretation of the Origins Theory ...............47 2.2.1. Theory
of origins as an explanatory theory .........47 2.2.2. Origins theory as predictive theory .............52 2.2.3. Theory
about origins as normative theory................................................. ...........54
IX
Machine Translated by Google 1 Epstein (2005) conceptualizes financialization as the growth in the relevance of financial motivations, financial markets, actors and financial institutions in the
functioning and operation of domestic and international economies. two
3
theme the interactions between law, financial development and economic growth still
global integration and economic and social development around the world, as well as
This movement, spearheaded by international bodies and entities, such as Banco
- INTRODUCTION
supported the reduction of the right to an instrument of economic forces, and Max's analysis
,
Although there is a vast economic literature that supports the superiority argument
This debate exposes the promotion, in the last two decades, of legal reforms aimed at
development arouse the interest of scholars on the subject. In the 19th century, it was
importance in relation to traditional sectors of the economy, such as industry, thanks to the fall
raises questions on the part of jurists of comparative law and other scholars of
perpetuate through legal traditions and legal transplants (GLAESER and SHLEIFER, 2002;
considered the worst since the Great Depression of the 1930s
of Anglo-American legal institutions to attract financial capital (LEVINE, 2005), the
XVI to XVIII (in particular, the glorious and the French) continue to produce obstacles to the
But the contemporary reality is more complex: the financialization1 of the world economy
accompanied by the rise of market society2 compete with reverberations of
1.1. Theme
Weber, for whom the rationality of law was a fundamental ingredient for the birth of
(KREVER, 2013), is based on the assumption that styles of social control whose
improving the business environment in the world.
from borders to capital mobility (EPSTEIN, 2005). There was also the monetization of
The contrast between Karl Marx's economic determinism, which
2008 financial crisis3
10
development (ROE, 2007; MICHAELS, 2009a; PISTOR, 2013a). As a background
LA PORTA et al, 2008). It is not new that the intersections between law, economics and
(AKERLOF and SHILLER, 2009). Over the past thirty years, financial services have gained
origins refer to medieval historical events or to the liberal revolutions of the centuries
capitalism (GINSBURG, 2000; MILHAULPT and PISTOR, 2008).
Considered one of the key moments of the crisis, on September 15, 2008, one of the four largest investment banks in the United States, Lehmann Brothers, filed the largest bankruptcy petition in that country: more than US$639 billion in assets and US$619 billion in debt. The global financial crisis that took place that year was responsible for the erosion of approximately US$10 trillion in the stock market in October 2008 alone (WIGGINS, PIONTEK and METRICK, 2014).
Sandel (2013) defines market society as the place where the market mechanism stops being just a means of organizing economic activity, and takes precedence in society's moral choices.
Machine Translated by Google 4
4
This is the systemic risk known as “too big to fail”, according to which some financial institutions have become too critical for the economy to the point that the government has to help them with public resources in order to avoid possible requests of cascading bankruptcy, as well as the loss of confidence in the sustainability of the financial system (KHANDANI, LO and MERTON, 2013).
(GADINIS, 2013) and called into question the structure it adopted, based on measurement and
Brazil did not remain isolated from the effects of this international crisis. Despite
for future studies.
go bankrupt”
values replacing ethics and morals, which stems from the predominance of the conception of
made use of countercyclical policies – for example, tax exemptions (RABELO, 2010).
2013).
United States government, fall 2008: preventing the collapse of the financial system
in the slowdown of the international economy and in the increase in international liquidity, which
the most relevant criticisms of the analyzed approaches; observe the role reserved for
risk management by financial institutions (ROMANO, 2014). This crisis
vigorous growth in the two years that followed, in 2009 there was a retraction of 0.2% of
contemporary analytical panorama of the main theories that seek to explain the interweaving
'what is there' to be investigated. Popper (1963) maintains that it is absurd to think about observation
The 2008 crisis represented a general failure of financial system regulation
of that country (PISTOR, 2014b).
present study is to analyze the main theories that intend to explain the role of law in
Justification
superiority of the market as a mechanism for organizing life in society (SANDEL,
Given this scenario, accepted the assumption that the law matters for the
, through the multibillion-dollar bailout of financial institutions deemed “too big to
jurist for each of these theories; and identify any theoretical gaps to be filled
negatively affected the exchange rate, in the sense of appreciation of the national currency,
relation to the functioning of the financial market. The specific objectives are: to outline a
11
Theories matter: they are fundamental to guide any investigation, as they define
demanded a still not completely defined solution to a paradoxical problem faced by the
Bruno Domestic Product (GDP). The Government of Dilma Rousseff (2011-2014), based on
between legal institutions, financial development and economic performance; identify
even if at the expense of taxpayers, jobs, savings and homes of citizens
development, although not fully understood, the general objective of the
1.2.
Machine Translated by Google problems. Popper therefore argues that theory, in the form of a hypothesis to be tested and
conceptual to the observer6 .
financial system for domestic and international politics, warns that, once
pure, without any prior selection of a certain object, a specific task, a problem, a point of view5 .
Specifically about the financial system and its regulation, the theory defines not only
within the scope of financial markets have happened in the last thirty years: (i) deregulation,
preview of the phenomenon to be observed implies the description of similarities, differences and
forbids, the better it is (POPPER, 1963).
through timeless elaborations, but also a perspective of the world, trapped in time
the market economy to efficiently allocate resources, all of which
possibly falsified, precedes observation. Every theory is also a prohibition to
Robert Cox (1981) goes further: theory always benefits someone and some purpose, because,
according to which markets are efficient and self-regulating: the traditional economy, based on
classifications that are based on interests, points of view and choices of
used to answer them, which compromises the entire research and can create a prison
substantiated significant changes in the financial system. Strange (1998) also argues
He says that “observation is always selective”. The conception
how the market is thought, but also determines the purpose of state regulation (PISTOR,
very restricted concepts of the research object – in her case, politics –, the questions
started in 1975, with the fall of restrictions on the differentiation of commissions in the brokerage of
Strange (1998), when criticizing the myopia of social theorists of not seeing the relevance of
supposedly benefit. According to Levinson (2014), four types of institutional change
space for past experiences and future expectations.
that the changes in the financial industry are largely due to the spread of the vision
12
evidence that goes against the horizon of the observer's expectations - let alone a theory
however sophisticated it may be, carries within it not only the attempt to transcend the present
in liberal economic theory, argues that the fall of barriers to capital is a prerequisite for
formulated in the investigation are also equally restricted, as is the methodology
2012). Gilpin (2001) argues that the rise of neoliberal theory in the 1980s
Popper (1963) questions the absence of meaning in the imperative “observe!”, without there being any prior understanding or mention of the direct object. This anecdote would illustrate the requirement for selectivity inherent in any observation. For Strange (1998), the literature of international relations and political science was incapable of understanding the functioning of politics due to the emphasis respectively on international conflicts and the promotion of liberal values. The adoption of excessively restricted concepts about what politics was, for Strange (1998), necessarily limited the scope of what could be found as an explanation.
6 5
Machine Translated by Google Shiller (2015) defines irrational exuberance as the psychological basis of speculative bubbles, which constitute a situation in which an increase in the price of shares fills the investor with enthusiasm, which psychologically infects other people and, in turn, reinforces the rise in shares and amplifies justifications for this rise, attracting more classes of investors through envy of other people's success, as well as excessive optimism.
7 bad: instead of reinforcing the potential benefits of open markets, policies that followed
they argue, human irrational exuberance and financial crises are seen as
the great growth of financial institutions, the deregulation of the financial market, the
thus marginalized the notion that financial crises find their cause in a supposed
stocks in the USA; (ii) liberalization, with a reduction in state barriers to foreign participation;
the 2008 financial crisis; and (iv) globalization, with the transnational operation of important
world economy, which manifested itself in four ways: (i) liquidity crises; (ii) preference
Financial Institution.
(MINSKY, 1986).
adoption of such a prescription would have been beneficial only to the financial elites of the economies
real world, taken by politicians, regulators and investors on a global scale (DAVIS and
ignore non-economic motivations, as well as disoriented choices – defined by them
influence the regulation of the financial sector in their favor (COFFEE, 2012; GADINIS, 2013).
managerial discretion of executives of banking entities. that was intimately
recommendations of liberal economic theory would have increased the fragility and risks of
13
adverse shocks, far from characteristics specific to the economic mechanism. Remains
The 2008 financial crisis would be a good illustration of this. Chefffins (2015) maintains that
by speculative investments; (iii) governments' inclination towards deflationary policies
(iii) consolidation, with the merger of financial institutions, which happened mainly after
natural and inevitable financial instability of the modern capitalist economy, arising from
diversification of financial services, as well as the differentiation of the governance system
specifically for banking institutions have contributed to too much
shocks, displacement of investments and dizzying expansions of bank credit
Akerloff and Shiller (2009) argue that this dominant economic theory fails to
Despite occasional incompleteness, the dominant theory influences decisions about the
(less growth and less inflation); and (iv) pressure for capital outflows. A
developed and under development (STRANGE, 1998; KREVER, 2013), capable of
linked with the assumption of excessive risks taken by financial institutions, which
as “animal spirits”, an element of uncertainty and ambiguity in the economy. That's why,
KRUSE, 2007). Including, for Strange (1998), bad theories can support policies
7
Machine Translated by Google $180 trillion that same year. Only the stock of transnational funding , which includes
financial institutions in the physiology of domestic and international economies (EPSTEIN,
Levinson (2014), the global total of financing carried out via the capital market amounted to
later enabled the emergence of the generalized crisis. This exposure to risk, however,
with greater returns, which, in turn, reinforced strategies
gains and losses, virtues and misfortunes of the financial system, ignoring boundaries between
sovereignties. This is the process that occurred over the last three decades in which there was expansion
benefited not only the chief executives, with bigger bonuses, but also large institutional investors8
US$6.5 trillion in 2011, excluding non-securitized and resold domestic credit. One
between 2008 and 2012 (US$1.841 trillion) (LEVINSON, 2014).
solutions found are not enough (SCHWARCZ, 2014), contemporary reality
national companies for international competition (DORE, 2008).
The globalization of finance, or the financialization of the global economy, enhances
14
presents a peculiar context: the greater importance of finance for the global economy. Second
in 2013. Another important change concerns the drop in the international use of debt securities (debt
funding9 ) of almost 70% (totaling US$705 billion), the increase in fundraising through equity funding10
of just under 80% (a total of
In addition to the uncertainties posed by the 2008 financial crisis regarding a new architecture,
2014), the accelerated growth in the complexity of financial intermediation, the rise of 2005), resulting from several factors, including: market deregulation (SAWYER,
defense of property rights, as well as the rise of a model for promoting
regulation capable of avoiding new losses (ROMANO, 2014), as well as the pessimism that
US$ 630 billion), and the stagnation of syndicated loans, an increase of 10% in the period
,
estimate of the value of all financial assets traded in these markets reached
of taking greater risks (CHEFFINS, 2015).
loans from international banks and issuance of debt securities, reached US$52 trillion
significant participation of financial motivations, financial markets, actors and
Cheffins (2013) recalls that institutional investors, such as pension funds, would be the investors capable of overcoming the monitoring disincentives suffered by individual shareholders. Therefore, in the 1980s and 1990s, they would have led an agenda for improving corporate governance and the rights of non-controlling shareholders, including lobbying for the relaxation of regulatory rules, in order to have access to investments with higher returns, which were based on greater risks, on the other hand. Refers to creditors' resources invested in the company, with the commitment to return fixed interest, accompanied by the right to execute the underlying guarantee in the event of non-payment of the debt. Refers to the capital invested by shareholders accompanied by the right to vote and receive dividends. 10 9
8
Machine Translated by Google economic impact directly affect the possibilities of enjoyment of rights (CASTRO, 2009).
In social life, groups and individuals may ascribe special considerations of value or
4.9% in 1980. The assets of the six largest US commercial banks grew
such as food and housing, are now made available on a daily basis only by
economic situation, referred to as “fiscal adjustment”, with the aim of reducing expenses and
available credit supply, including its costs, as the price of consumer goods
between 2001 and 2008, financial institutions listed on the S&P500 index showed
Financialization is also associated with the change in the main source of accumulation of
United States, at the end of the 20th century and the beginning of the 21st century, the growth of institutions
social constructions of relationships and goods, include beliefs, feelings, affective symbols or
financial institutions was higher than that of other companies (STRANGE, 1998; CHEFFINS, 2015).
global economy through the financial system: financial crises highlight the link between
value is only secondarily linked to economic price.
Every economy, according to Castro (2005) (who relies on Karl Polanyi), rests on
general economy: this is a relative gain in importance, in which entities in this sector
the right to work and the right to health, is also increasingly conditioned to flows
contracts to the final consumer (CASTRO, 2014). Consequently, policy decisions
Even so, in Brazil, the government introduced changes in its policy in 2015
protections – a certain circumstantial unavailability – on certain notions that apply
15
four times more in relation to that country's GDP between 1994 and 2009. Furthermore, in the period
monetary intermediation, which links the enjoyment of constitutionally guaranteed rights to
cultural. To these social relations, not always oriented in favor of the exchange of goods, the
profits: from trade and production to an emphasis on the financial sector (KRIPPNER, 2005). Us
superior performance to all others (CHEFFINS, 2015).
elementals has built-in the cost of credit used by the producer to make these available.
same goods and is passed on cumulatively in the production chain through aggregates
However, the theory has profoundly influenced not only the transformation of
According to Cheffins (2015), the rise of the financial sector not only follows the growth
capital flows and enjoyment of rights.
individuals of a given group can assign a meaning that cannot be specified at first – the
Castro (2014) observes that the empirical enjoyment of subjective fundamental rights, such as
financial institutions, which escape full control through the use of force. basic rights,
began to represent around 8.3% of North American GDP in 2006, compared to
a social substratum that is neither fixed nor immutable nor is it defined solely in economic terms.
Machine Translated by Google 11 FOLHA DE SÃO PAULO, 09/14/2015, Government announces cut of R$ 26 billion and wants to revive CPMF. Accessed at http://www1.folha.uol.com.br/poder/2015/09/1681450-corte-de-gastos-do-governo-deve-ficar proximo-ar-26-bilhoes.shtml
Schumpeter (1911), who argue that the role of the financial system is essential for
scientific journals, as well as books, on corporate governance, finance
Law (Law and Economics); (ii) analysis guided by the Theory's propositions about the
from its three possible interpretations – explanatory, predictive and normative character.
with an emphasis on publications presented in the last twenty years. This investigation is based on
increase state revenues, without any prior discussion about the effects of these measures
not about the effects
that it is the intermediary institutions that identify and finance entrepreneurs with
on the effective enjoyment of constitutionally guaranteed rights
more appropriate to discuss changes in the financial system, as that environment brings together
financial market presents a scenario in which there is a prominent place for a theoretical framework
markets (STRANGE, 1998).
1.3. Methodology
Namely, the second section is dedicated to Law and Finance literature ,
interweaving between law, financial development and economic performance. Are they:
mobilization of financial flows towards economic development to the extent that
16
international institutions and the role of legal institutions in promoting economic development,
Origins, the most sophisticated formula in Law and Finance literature; and (iii) examination of this theory to
the best opportunities for innovation.
thinking of Strange (1998), for whom understanding the financial system requires
In the third section, it focuses on three alternative approaches, which stand out from the
other criticisms directed at the dominant framework for the holistic nature of understanding the
multidisciplinary approach. Likewise, it is assumed that the academy is the place
distributive over different social groups.
actors who are freer of interests, as opposed to politicians and the operators of
This monograph follows the structure designed by Pistor (2012), for whom the regulation of
largely supported by assumptions borrowed from mainstream economic theory.
which is analyzed from three perspectives: (i) its differentiation in relation to the current Economic Analysis
This study is the result of a bibliographic review of the main articles published in
The research carried out is also based on the intuition of Bagehot (1873), Hicks (1969) and
11
Machine Translated by Google 17
in the bibliographic review on the most relevant points of all these theoretical discourses and their
(i) the New Law and Development (NDD); (ii) the Legal Analysis of Economic Policy
respective impacts on the regulation of the financial system. The fifth section ends with
brief summary of this monograph.
Finally, the fourth section consolidates some brief evaluations based on (AJPE); and (iii) the Legal Theory of Finance (TJF).
Machine Translated by Google 12
14
13
15
for finance, in particular, gained space in the academic and legal debate to the point of becoming
company managers, Shleifer and Vishny (1997) concluded that competition, company reputation14 , as
well as excessive optimism15 on the part of investors are incapable factors
legal framework followed by a country, in the sense that the legal and institutional framework would have
- DOMINANT THEORETICAL FRAMEWORK: LAW AND FINANCE
determinants of financial development. Part of the economic literature maintains that the
of common law.
The study by LLSV (1997, 1998) followed the path set by a previous one, by Shleifer and Vishny
(1997), on corporate governance13 (KAPLAN and ZINGALES, 2014).
The link between finance and economic growth raises the question about the elements
causal effect on economic growth (LA PORTA et al. 1998; HARRIS, 2008;
comparison, which codified and measured the level of legal protection offered to investors,
empirical) by a current known as Law and Finance, which, in the last two
creditors and shareholders, by commercial laws of 49 countries, which follow the traditions of civil law and
18
decades, has defended financial and economic development as a product of the tradition
international scope (GAROUPA and PARGENDLER, 2014; PISTOR, 2012).
resources to these business companies and, seen on a large scale, the financial development
(JENSEN and MECKLING, 1976). This was the assumed assumption (and transformed into a hypothesis
The first – and, perhaps, most influential – study of this literature, presented by La Porta et al.12
in a pair of articles from 1997 and 1998, constitutes empirical legal research
legal protection of investors external to the company limits the possibility of deviation, on the part of
MALMENDIER, 2009). As a result, the relevance of law to economics, in general, and
agents internal to the organization, of the resources invested in it, which would ensure the offer of more
become the dominant theoretical paradigm in understanding the intersection of law and finance in
By analyzing the ways in which investors guarantee a return on investments with
The four authors of the study in question are generally cited using their initials, LLSV. According to Collison et al. (2011), the four authors are the most influential in the world in the area of economics related to banking activity: Shleifer, with 3,765 citations in Essential Science Indicators, followed by Lopez-de-Silanes, with 2,396, La Porta, with 2,394, and Vishny, with 1,531.
According to this explanation, managers return the income from invested resources because they hope to raise more resources in the future from the capital market. Therefore, establishing a good payment reputation is essential to influence future investors (SHLEIFER and VISHNY, 1997).
In the study A Survey of Corporate Governance (1997), Shleifer and Vishny conceptualize corporate governance as a way in which investors guarantee the return of resources invested in companies. Corporate governance mechanisms, in turn, are conceptualized as economic and legal institutions that can be changed through a political process.
According to this approach, investors would offer their resources, expecting appreciation in the company's short-term securities, without reflecting on the means of recovering their investments. An extremist possibility
Machine Translated by Google this would be the occurrence of a Ponzi Scheme, in which the company that raises funds uses resources in a fraudulent and sequential manner: it pays high returns to past investors with the resources of future investors (SHLEIFER and VISHNY, 1997). One of the conclusions reached by the study was that the three corporate governance systems analyzed, the United States, Germany and Japan, present significant combinations of legal protection for investors with concentration of ownership, whether through majority shareholders, corporate reorganizations or large bank creditors. According to Jensen and Meckling (1976, pp. 308), agency theory explains business behavior based on the difference in interests between company administrators, holders of managerial control, and investors, holders of company ownership. The agency relationship involves a contract by which the principal (individual or ownership group) delegates powers to another (the agent) so that he or she can carry out activities of interest to the principal. Starting from the premise that both are utility maximizers, the theory assumes that there are incentives for divergence between the agent's behavior and the principal's interest. Such divergence can be limited by the principal, but this implies costs (agency costs), which can be summarized as: (i) costs of monitoring the agent by the principal; (ii) costs (pecuniary or otherwise) of the agent himself to demonstrate compliance with his obligations to the principal; (iii) costs of drafting contracts aimed at reducing agency costs; and (iv) residual losses resulting from the reduction of wealth by the principal and resulting from unavoided divergences between the agent's decisions and the principal's interests. According to Demsetz (1967), property rights are understood as a bundle of rights over a thing, an instrument of society that allows an individual to form expectations of keeping that asset under their control in relationships with other participants in society. Despite this broad definition of property rights theory, Jensen and Meckling (1976, pp.307) restrict property rights to what is generally defined contractually regarding the determination of how gains and costs will be distributed among the participants of a business organization. .
According to Fama and Miller (1972), finance theory deals with how individuals and companies allocate resources over time. She explains how the existence of capital markets, which allow means of exchanging resources available at different points in time, facilitate solutions to resource allocation problems by companies.
is perceived as a unit through a legal fiction, it is in essence a
investigation.
to fully explain fundraising in the financial market. In your place, Shleifer
shareholders and creditors, as essential approaches to a good governance system and Vishny (1997) suggest the concentration of ownership and legal protection of investors,
The theory of the firm's ownership structure integrates elements of economic theories
company, by Coase (1937), adopted in the theory of the structure of the ownership of the firm, by Jensen and
19
Meckling (1976), which was the theoretical perspective chosen by those authors to base their
opposite to the traditional view that sees the firm as just a market agent, a “box
organization of economic activity, in general, and corporate governance, in particular,
it also precedes the study by Shleifer and Vishny (1997): it is present in the contractual view of
black” (JENSEN and MECKLING, 1976). Although it was not the first study focusing on
corporate16 .
of agency17 , property rights18 and finances19 , and assumes that the company, although
The notion, however, that legal rules play a fundamental role in
complex of contractual ties between individuals with conflicting objectives. It's about theory
18
19
16
17
Machine Translated by Google Jensen and Meckling (1976) state that the principal-agent problem occurs in all organizations and in
Shleifer and Vishny (1997) cite the expropriation of assets by managers through the use of transfer prices as direct costs. They also mention Grossman and Hart (1988), who describe other forms of manifestation of this problem: private benefits of control, such as indirect gains and superfluous travel, irrational expansion of the company, the manager remaining in a management position even when contrary to the interests of shareholders.
The first analysis in this sense was carried out in The Modern Corporation and Private Property, by Berle and Means (1932), which dominated the research agenda of the North American commercial law academy in the 50 years following its publication. According to this approach, modern companies are characterized by the separation between those who have legal ownership over them and those who actually control them. The first group would be represented by shareholders, while the second by the board of directors and business managers. This division results in management groups that seek private benefits from control to the detriment of the interests of shareholders, who, as they are diffuse, have little incentive to monitor the companies to which they have allocated their resources. As a result, without robust regulation, shareholders would be harmed by powerful executives (CHEFFINS, 2013).
Cheffins (2013) states that the study by Jensen and Meckling (1976) is the most cited in research on corporate governance. The author, citing Ocasio and Joseph (2005), states that 1976 was also the year in which the term “corporate governance” was used for the first time in the official journal of the North American federal government.
See note 17.
all cooperative efforts, at all levels of administration. 24
20
23 22
21
more consistent with the interest of the principal, this type of relationship, even if there are ways
to limit this eventual divergence, presents a cost23 . Therefore, the separation between ownership
and control in companies24 places them within the context of the agency cost problem. In
to the Law and Economics literature and was used as a scientific basis for the conclusion that the
separation of ownership/control20 nor made express mention of “corporate governance”, the
For the theory of the structure of the firm's ownership, a peculiarity of the company
most financial market regulations would be unnecessary in terms of governance
The theory of the company's ownership structure became a starting point for research in this
area21 and is now considered a cornerstone of financial economics (SAITO and SILVEIRA, 2008).
in which one or more people
shareholders, suppliers, etc.).
(principal) assigns decision-making powers to a third party service provider (agent).
La Porta et al. (2000a) state that the approach of Jensen and Meckling (1976) belongs 20
Considering the possibility of divergence between the actions taken by the agent and those
delegation of decision-making powers, the principal-agent problem and the consequent costs
and Vishny (1997), it is about the separation between “finance” and “management”. Such a separation would bring
the firm from a “principal-agent” relationship
would emerge in all these contracts (between workers, creditors, administrators,
contemporary is the separation between “ownership of assets”, in the hands of external investors,
,
and “company control”, submitted to internal managers – in terms used by Shleifer
In other words, if companies are conceived as contractual complexes with some
corporate. La Porta et al. (2000a) note that this theoretical discourse presupposes that
22
Machine Translated by Google 25 Jensen and Meckling (1976) make a curious analogy between this conception of the company and the dominant conception of the market: in both, the final behavior would result from a complex balance process between
Financial contracts involve sophisticated and rational parties who, on average, recognize
disagreement with their expectations, these impositions through greater requirements of
securities . Thus, managers would have the incentive to restrict their own
To illustrate, when an investor allocates his resources in a certain company and
investors happen works in the theory of the firm's ownership structure as a
state jurisdiction and the form of conflict resolution between the contracting parties. The influence
its contractual obligations to disclose information about its activities and its
a blow to the company's reputation, which will be considered by other investors in Dali
argue that this occurs because companies internalize agency costs (the costs
of what can be contracted, in order to reduce agency costs: which contracts
that company fails to fulfill obligations assumed by it, such as disclosure obligations
ex ante incentive that disciplines the company manager's own behavior, in the sense of
Jensen and Meckling (1976) further argue that the law has an impact on the activity
good treatment of investors.
the functioning of the financial market. The possibility that such a sanction imposed by the
of agency and, consequently, by increasing investments in the company (JENSEN and
the risk of expropriation of their investments, penalize companies that fail so much with
control powers, through contracts with investors, in order to limit the chance
returns or even increasing credit to the company, for example.
of law arises from the fact that companies are not individuals, but rather legal fictions
21
of divergence between owners and controllers) when securities and securities are issued
on. Thus, investors would be able to impose sanctions on companies that acted in
MECKLING, 1976).
can be agreed between individuals and organizations, the hypotheses for triggering the
of accounting information, the theory of Jensen and Meckling (1976) considers that this represents
economic when it establishes the types of possible contracts, as well as regulating the scope
prevent the company from failing to meet its contractual obligations. Jensen and Meckling (1976)
Jensen and Meckling (1976) maintain, however, that this is only part of the explanation.
of expropriation and diversion of invested resources. This would be responsible for reducing costs
whose behavior can be understood as that resulting from the balance achieved by individuals with
conflicting objectives within a structure of contractual relationships25 . Per
Machine Translated by Google 26
conflicting interests. However, they notice a difference. For the company, the law confers a fiction of legal unity. As for the stock market, for example, the “error” is made of conceiving it as a person with its own motivations and intentions, even though there is no legal provision in this regard. Coase (1961) emphasizes transaction costs that refer to the process of economic exchange itself. In a cost-free scenario, private negotiation between two contracting parties could lead to an efficient decision from an economic point of view. However, given the existence of transaction costs, Coase (1961) maintains that courts, when deciding on individual cases, should take into account not only the benefits generated by this judicial decision, but also the possible transaction costs. generated, because of this same court decision, in activities outside the scope of the judicial process. That is, Coase (1961) defends the consideration of the total effect of the decision.
assumption (LA PORTA et al, 2000a).
Investors have a more developed capital market than their peers.
Despite such considerations about the importance of law for the economy, the literature
Therefore, the legal system would determine the productivity, profitability and viability of the various forms
Assuming that investors are able to sanction defaulting companies and
companies, as well as the allocation of resources in the financial system. Shleifer and Vishny
(1997) even observe that when two countries have judicial bodies capable of
of economic organization (JENSEN and MECKLING, 1976).
Law and Economics, represented here by the theory of the structure of the firm's ownership, of
judicial enforcement of contracts observed around the world play a central role in
necessary regulatory intervention on financial markets, in an environment of
highlights the role of law and regulation as a form of investor protection, which, in
would not be
corporate governance of each country and, consequently, on the ownership structure of
22
competition (STIGLER, 1971; LA PORTA et al. 2000a).
premise. On the other hand, they maintain that differences between the legal rules protecting
(1976) conclude that, as long as contracts agreed between investors and companies are
market competition as a sufficient factor to solve the problems arising from The authors, two of the four precursors of Law and Finance, thus discarded the
separation of ownership and control. Consequently, Shleifer and Vishny (1997) consider
duly applied by the Judiciary, as presupposed by Coase (1961),
investors found in different jurisdictions, as well as differences between the form of
that managers consider this capacity as an incentive to self-restrict control powers
Jensen and Meckling (1976), takes judicial enforcement of contracts as a given
control through contracts and the consequent reduction of agency costs, Jensen and Meckling
Shleifer and Vishny (1997) move away from Law and Economics when they abandon this
ensure equivalent contract compliance, the country that offers greater legal protection to
26
Machine Translated by Google 27
28
Faced with the perception of greater importance of corporate governance, scholars of financial economics would have started to place greater emphasis on the analysis of the political and regulatory environment, what Jensen (1993, pp. 872) calls “finance politics”. From that moment on, Jensen (1993) argues that economists inclined to normative theory would be more interested in making the internal control systems of companies seek efficiency and optimization of the value of companies, while economists focused on positive economics would have as their greatest challenge understand how these internal systems interact with market, legal, political and regulatory factors. In the 1990s, the best corporate governance system was discussed. On the one hand, there was the system of dispersed ownership, marked by a thriving capital market, with great transparency and strong governance mechanisms. On the other hand, there was a concentrated ownership system, characterized by weak capital markets and low transparency (COFFEE, 2000). Shleifer and Vishny (1997) found that successful systems of corporate governance, such as those practiced in the United States, Germany and Japan, combined characteristics of these two typical models: legal protection for minority investors and a relevant role for majority shareholders. Although these authors did not find evidence of superiority of one of these governance systems over the other two, these three systems together, according to Shleifer and Vishny (1997), were considered superior to the others, such as Italy and Russia, characterized as having low protection. minority investor or with companies controlled by families and internal managers.
Jensen (1993), economist of the Law and Economics approach , suggests a change in perception on the part of economists about the lack of regulation in financial markets in the early 1990s. For Jensen (1993), data collected until then would have corroborated failures in systems of internal control headed by boards of directors in large corporations. This would have prevented managers from maximizing the efficiency and value of these entities, which was one of the propositions of the theory of firm ownership. Jensen (1993) stated that conflicts between managers and investors would have played a central role in understanding finance.
judicial application of these same norms, which could have a great influence on the
(KAPLAN and ZINGALES, 2014), Shleifer and Vishny launch at the end of the study questions about
according to La Porta et al. (2000a), challenges the Law and Economics perspective , which advocates
the unnecessary need for regulation27 (STIGLER, 1964; EASTERBROOK and FISCHEL, 1991).
his finding that the protection of property rights would be fundamental to guaranteeing Based on the company's contractual vision, with its emphasis on agency costs and
the nature of the legal protection of investors provided by the different legal systems
(2008).
investor, as well as the institutional character of corporate governance, opened the way for research on
what would be the best corporate governance system28 . However, given the
23
the fact that there was no systematized data on corporate governance around the world
subsequently answered by La Porta et al. (1998), for the studies that were inspired and
financial resources receive the due return on their investments, according to the risk
(CHEFFINS, 2013). In this way, the need for legal protection for the
for the consolidation of all this literature, the theory about the origins, elaborated by La Porta et al.
investments, Shleifer and Vishny (1997) identified corporate governance mechanisms
around the world, as well as differences in trade laws and variations in
as economic and legal institutions designed to ensure that suppliers of
corporate governance and, therefore, on investments. These questions that were
Machine Translated by Google 29
30 La Porta et al. (2008) divide these studies into three categories: (i) those that analyze the effects of origins on investor protection and of this on financial development; (ii) those that examine indices of state regulation on economic activities, such as the labor market; (iii) those who investigate the effects of origins on state institutions, such as the Judiciary, and of these on property rights and the application of law. La Porta et al. (2008, pp.3) hypothesize that such control is also reflected in other aspects of life.
private individuals and the abuse of rights by the State: the common law would strengthen the mechanisms
2009a), inaugurating what is now called “numerical comparative law” (SIEMS, 2005) or
quantitative". The second states that these “variations are due to the historical origins of the
2.1. Theory about origins
LLSV to the data found in the initial research, as well as the studies that followed29 - states that the origins,
conceptualized as systems of social control of economic life30
that it is possible to measure the right, with regression analysis, with scatter diagrams, being the
main technique used for this purpose. On the one hand, the method employed by this approach
The theory of origins - the name by which the interpretation given by
national legal system”. The third assumes that “the two main legal traditions, civil law and
2.1.1. Quantification of the right: debates on measurement and reductionism
summarized the theoretical building in four propositions. The first maintains that the “rights
quantitative analysis is the foundation stone”. On the other hand, the use of this method
The first supporting column of the theory about the origins consolidates the understanding
24
countries differ in a standardized way, making it possible to measure these differences in a
stipulates that “differences between legal rules would be relevant to the growth
Despite welcoming some of the criticisms that have emerged in the ten years since Law
on proposals to reform legal institutions around the world, to the point that Krever comparative law and finance (DEAKIN and SIEMS, 2010). This method has had so much influence
(2013, pp.132) state that “if law is the new church of development scholars, the
and Finance (1998), La Porta et al. (2008) maintained the essence (MICHAELS, 2009a) and
economic and for the regulation of society” (LA PORTA et al., 2008, pp. 326).
also raised criticism, mainly coming from jurists of traditional comparative law,
extremely persistent throughout history, have an impact on the normative framework of
common law, differ in the way they seek the balance between the disorder of agents
society as well as for economic activity.
market, while civil law would restrict them or replace them with state control”. The last
was responsible for the most important development in comparative law (MICHAELS,
Machine Translated by Google The CRI is an index that aggregates four variables: (i) existence of mandatory minimum requirements, such as creditor consensus, for requesting judicial recovery; (ii) possibility of liquidation of guarantees in case of approval of the request for judicial recovery; (iii) preference for secured creditors in the event of bankruptcy; and (iv) judicial appointment or by creditors of a new administrator in the event of judicial recovery. If the country analyzed had any of these provisions in its law, a value of 1 was noted. Otherwise, zero. The ADI therefore varies from zero to four (LA PORTA et al., 1997).
The ADI is an index that aggregates six variables indicative of the existence of six rules favorable to shareholders within a jurisdiction: (i) possibility for the shareholder to vote by means other than in person; (ii) possibility of trading company shares prior to general meetings; (iii) existence of proportional representation on the board of directors; (iv) existence of judicial mechanisms for challenging majority decisions; (v) minimum percentage of shares required to be less than or equal to 10% to call an extraordinary meeting; and (vi) existence of preference in the purchase of new issues (“anti-dilution” rights). If the country analyzed had any of these provisions in its law, a value of 1 was noted. Otherwise, zero. The ADI therefore varies from zero to six (LA PORTA et al., 1997; SPAMANN, 2010).
This is an average of the monthly “rule of law” measures, which vary from zero to ten, measured between 1982 and 1995, according to the International Country Risk Guide (ICRG), an index resulting from more than thirty metrics .
See note 9. 32
34
35
31 See note 10.
33
protects minority shareholders against majority shareholders in the corporate decision-making process
public offerings). In a second category, the legal protections provided to investors
accustomed to research with descriptive methods and studies with small scope (MICHAELS,
In the first work in the Law and Finance literature, La Porta et al. (1997) verify the
includes both the legal origin of each country’s legal system – the sample was divided into four
categories, common law countries , the French branch of civil law, the Germanic branch of civil law
2009a).
by the commercial laws of those same 49 countries are quantified in two indices: one, referring to
most relevant right is the right to vote, the CRI assumes that the right to determine
domestic companies, using as indicators, for example, the number of firms listed on stock exchanges
(XU, 2011). While the ADRI assumes that the
the liquidation of guarantees in the event of non-compliance. A third category of variables
25
of securities and the number of new primary offerings of securities (IPOs - Initial
the protection provided to them, especially during the recovery and bankruptcy process
performed regressions with three categories of variables. The first corresponds to the value of these how much debt funding Therefore, .
capital markets in 49 countries, as well as the ease of access to them by companies
(CRI – Creditor Rights Index)
and another, related to the rights of creditors, which measures
there is a strong correlation between a country's legal system and the size and breadth of the
law and the Scandinavian branch of civil law – regarding the quality of application of law, verified from
indices on the normativity of law in the countries of the sample35 .
rights of minority shareholders, which measures how much a country's business laws
capital markets, including both equity funding
(ADRI – Antidirector Rights Index);
31 32
33
34
Machine Translated by Google According to the website of the PRS Group (Political Risk Services), publisher of the ICRG, this index is the product of research led by professors William Coplin and Micheal O'Leary, from the University of Syracuse, in partnership with the CIA/USA Department of State, whose objective was to develop a rigorous method for analyzing a country's risk components. Also according to the portal, the research gained strength during the Iranian Revolution, in the 1970s, with the nationalization of foreign companies.http://www.prsgroup.com/ about-us/our-two methodologies/icrg. Accessed August 25, 2015.
The second version of the study presented by La Porta et al. (1998), although following the same
respectively: common law countries achieved an average of 4.00 and 3.11; the civil law countries
law in relation to those of civil law, especially those with jurisdictions influenced by the
nationalization or confiscation, by the government and (iv) risk of questioning contracts by the
comparative between 49 common law and civil law countries showed positive correlations
prepared in La Porta et al. (1998), has been used in more than one hundred quantitative studies on
number of indicators relating to the quality of law enforcement, in addition to normative strength
female entrepreneurs from each country in the sample. As for the ADRI and CRI indices, the
in the ten largest companies in each country with shares traded on stock exchanges (XU, 2011). There was,
or one of the explanatory variables, with the purpose of linking investor protection and
government. Other indicators on property dispersion in
significant differences between ADRI (shareholder protection), used as an independent variable, with
The indices that translate into numbers the rights of investors, whether they are shareholders
of law: (i) efficiency of the judicial system, (ii) corruption, (iii) risk of expropriation,
Based on the statistical analysis of the data and the correlations found, this research
between legal tradition and economic performance only with regard to the association between civil
structure of the previous year's work, presents distinct regressions, as well as a greater
French branch. The correlations found associated better economic performance and greater
from the Scandinavian branch, 3.00 and 2.00; the civil law countries of the Germanic branch, 2.33 and 2.33; and the
economy, business, finance (SPAMANN, 2010), establishing connections between the rights of
26
however, discrepancies regarding the data found when contrasting common countries
methodology of the previous study, from 1997, resulting in these two indices
French law and the concentration of corporate ownership.
influence of origins far beyond the field of finance. Only the ADRI, as
publicly traded companies, with analysis of the corporate composition of the ten largest entities
or creditors, have been used by other studies since then as a dependent variable
dependent variables such as the size of capital markets and ownership dispersion
French civil law countries , 2.33 and 1.58.
financial development with common law countries . The authors inferred a causal relationship
Machine Translated by Google 36 Spamann (2010) points out that the indexes elaborated in La Porta et al. (2006) and Djankov et al. (2007) would have already incorporated the methodological improvements he defended in his revisitation of the original ADRI, constructed by La Porta et al. (1998).
shareholders and, for example, stock returns and resource allocation (GIANNETTI and
level of share control to block the majority shareholder (NENOVA,
would not be effective in explaining debt levels between common law countries and those
LOPEZ-DE-SILANES and SHLEIFER, 1999); the payment of higher dividends (LA PORTA
laws index, Collective relations laws index (BOTERO et al., 2004), Public enforcement index (LA
PORTA et al., 2006)36 and Anti-self-dealing index (ASDI) (DJANKOV et al., 2008). One
full and accurate accounts about the corporate reality have more development
(DAHYA, DIMITROV and McCONNELL, 2008). Other studies have also established
LOVE, 2004); increase in the value of banking institutions (CAPRIO, LAEVER and LEVINE,
(SPAMANN, 2010).
accounting information, in the sense that jurisdictions that prioritize credit rights in
et al., 2000b); the greater appreciation of the company's assets (LA PORTA et al., 2002); better
Since these new indices measure different aspects of investor protection, they do not
address creditor rights and the development of financial intermediaries,
links between ADRI and: the dispersion of ownership in large companies (LA PORTA,
same orientation of quantification of rights, as Employment laws index, Social security
(1998), for example, found a link between the CRI, the origins and the determination of the
KOSKINEN, 2010) and the presence of independent executives on the board of directors of companies
of civil law. On the other hand, Xu (2011) cites later research that made use of this same index and
2003).
of these financial intermediaries (XU, 2011).
27
On the CRI, on the one hand, La Porta et al. (1997) come to the conclusion that the
2007); lower level of private benefits of control (DYCK and ZINGALES, 2004); smaller
banking development. In the same sense, Levine, Loyaza and Beck (2000), when
bankruptcy, effectively respect contracts and promote the communication of information
level of corporate governance, market value and operational performance (KLAPPER and
identified the impact of origins on the application of contracts and the quality of
make the original ADRI obsolete – this is a complementary relationship
At the same time, other studies in the literature constructed similar indices following the
identified its relevance to various aspects of financial development. Levine
Machine Translated by Google Spalmann (2010) illustrates this inconsistency with the following example: the difference between the values in Austria and Germany attributed to preemptive rights in issuing new shares to shareholders. Although the normative provisions in both countries were practically the same (right of preference as long as certain conditions were met, such as payment in currency), Germany was assigned a value of zero and Austria, one. The law of the State of Delaware, used as a parameter for the United States, allows companies to change all the rules used as variables in the ADRI in their respective articles of incorporation (SPALMANN, 2010).
37
38
SPAMANN, 2010); the excessive variation of values verified between countries of the same
cites: (i) the existence of dispositive norms, with the possibility of substitution, addition or
(COFFEE, 2001; DAM, 2006), the selection of variables studied for inclusion in the ADRI
While even critics of the application of quantitative methods to law admit
in an unprecedented scope of research (VAGTS, 2000; GRAFF, 2008; SPAMANN, 2010),
used in ADRI, in particular, were ambiguous enough to house binary values
(0 or 1) different for similar situations or too restricted to the point of not admitting any exception37 .
As the ADRI was intended to measure “commercial laws”, the unrealistic aspects
these studies are admirable for having found consistent and robust evidence,
(GRAFF, 2008); ignorance of administrative regulatory rules and case law
(2010). Considering that there is hardly any legal rule without exception, the accuracy of the data
following problems: ambiguities in the definitions of chosen variables (SPAMANN, 2010);
divergence between the “law of laws and books” and the “law of practice” (SPALMANN, 2010;
collected by LLSV has been questioned, in the sense that the original definitions of variables
28
the questionable relevance of the variables analyzed for measuring investor protection
A version of the ADRI with more accurate data for 33 of the 46 countries that
such as ADRI and CRI, focus both on the lack of functionality and effectiveness of these metrics
contrary to the formal prescription in law, and (iii) the existence of infralegal norms of a nature exclusion of rules, by the companies' articles of incorporation38 , (ii) business practices
regulatory framework with act as substitutes for legal prescriptions. In short, it would be the
and in methodological flaws (KREVER, 2013). Briefly, such criticisms refer to the
participated in the initial sample of La Porta et al. (1997, 1998) was built by Spamann
MICHAELS, 2009a).
the legal system is inherently complex and difficult to measure in quantitative terms
as functional substitutes for the existence of prescriptions in formal law (DAM, 2006;
(DAVIS and KRUSE, 2007; MICHAELS, 2009b). Criticisms regarding the creation of indexes,
legal family (DAM, 2006; GRAFF, 2008).
formal laws seem to have escaped their measurement – among these hypotheses, Spalmann (2010)
Machine Translated by Google 39 Spamann (2010) notes that while La Porta et al. (1998) made use of data compiled by jurists from the countries analyzed, the methodology he employed uses the completion of standard forms, which would provide greater conciseness in data collection.
The version constructed by Spamann (2010), although it maintained all the definitions of the
variables from the original index39 , no longer found significant correlations between the variables
how comparative research aimed at promoting pro-development reforms continues
reformable, such as legal tradition
check the conclusions reached by studies that made use of the original ADRI, generalize
for example, the security of private property does not depend only on legal protection, but
or even the issues to be resolved in general assemblies (COFFEE, 2001). The same
the conclusion of the superiority of the common law over the civil law, in particular that of
data collected (SPAMANN, 2010).
to offer sufficient subsidies for reforms on specific issues, such as guaranteeing
third parties without paying a premium – value above the market price –, which could
that data collected in other works would automatically suffer from the same
also support, or not, for expropriation by the State; (ii) numerical indicators on the
partial and surmountable protection, since the guarantees ensured by the assessed rights are not
French tradition with regard to financial development. Even though this could
some variables do not uniquely capture certain features of the legal system –
some aspects of the legal system (KREVER, 2013). In this sense, Deakin and Siems (2010)
“origin”, “capital market size” and “ownership dispersion”. It thus became
When an index intends to measure a certain object, it is essential to know exactly
almost the same orientation. According to Davis (2004), such quantitative efforts would not be
Thus, the variables analyzed by La Porta et al. (1998) in ADRI assume that shareholders
29
property rights; (iii) conclusions may arise from legal aspects not
The criticisms that refer to later studies of the Law and Finance literature, as well
argue, for example, that the variables chosen in one of the indices, the ADRI, offer
configure the main hypothesis of corporate reorganization to the detriment of the minority shareholder,
inconsistencies of the original ADRI would be inappropriate, although a revisitation of the
sufficient to protect minority shareholders against the takeover of corporate control by
quality of the system stem from overly broad system features such as rule of law,
able to capture all aspects of legal systems in a useful way for three reasons: (i)
which information should be aggregated (GRAFF, 2008), under penalty of implicitly privileging
Machine Translated by Google 42
40
41 Graff (2008) also demonstrates that the way in which the variables were aggregated in the indices, the types of tests carried out and the methodology for measuring values, as well as the exclusion of two variables “one share-one vote” and “mandatory dividends” were decisive for the conclusions reached by La Porta et al. (1998).
On the contrary, Siems (2005) states that other comparativists, such as Markesinis (2004), defend the
Combined as the author believes fit, the supremacy of common law countries disappears.
Cheffins (2013) states that even a defender of “shareholder democracy”, such as Schwartz (1983), admits the consensus on the part of the most careful observations in the sense that direct shareholder participation is impractical, due to their rational indifference towards of corporate affairs.
lack of fixed methodology for comparative law research.
The author does not, however, find the same inconsistencies in the CRI (creditors), an index that does not have as much explanatory power as the ADRI (LA PORTA et al., 1997; BECK and LEVINE, 2003).
comparative law prefer qualitative methods (REITZ, 2009; GAROUPA e
different, but that have the same purpose (norms with more than one function), or even
Porta et al. (1998) conducted research focused on the functioning of legal rules, the
minorities behave like residents of a village where decisions are made in
the variables “possibility of non-in-person voting” or “exemption from blocking
(DAVIS and KRUSE, 2007).
For this reason, the discipline of Comparative Law has long consolidated42 the functional approach
democratic procedures based on the majority criterion, in which any condition for participation necessarily
represents a 'non-protection' for the shareholder 40 (GRAFF, 2008). For example,
study is based on the codification of legal rules only by listing
DEAKIN and SIEMS, 2010), as well as the perception of uncertainty and the interactions between different
comparative law (SIEMS, 2005), although jurists in the area (MICHAELS, 2009a) and the
components of the legal system that can influence social and economic outcomes
30
legal academic environment (DAVIS and KRUSE, 2007) still ignore the debate. Despite her
terminology, cultural differences between legal systems, the risk of arbitrariness in the selection
and not an exclusion of minority shareholders from the decision-making process (GRAFF, 200841).
functional) (SIEMS, 2005; MICHAELS, 2009a). In this sense, some authors defend the extrajuridical phenomena that can exercise functions of legal rules (equivalent
need to understand the law within a context (DEAKIN and SIEMS, 2010), or at the same time
The translation of law into numerical values is also challenged by the perspective of
of objects of study, the eventual lack of knowledge of extralegal norms (MICHAELS, 2009b;
actions prior to meetings”. The existence of obstacles in these cases does not
similarities and differences between laws (DEAKIN and SIEMS, 2010). However, scholars of
necessarily a lack of protection - it can even prevent fraud, representing a protection
PARGENDLER, 2014) and indicate that it is fundamental to consider linguistic problems and
(MICHAELS, 2009a). According to this method, there may be legal solutions formally
Machine Translated by Google 44 43 MICHAELS (2009), pp. 787. An example that corroborates this observation is that in mid-1995 there were doubts about the best corporate governance system. The Japanese and German systems caught the attention of specialists precisely because they present other structures, with greater long-term financing, in the case of Japan – as opposed to the greater occurrence of mergers and acquisitions in the USA –, and greater participation of bank creditors, in Germany , compared to the dispersion of ownership among shareholders, as occurs in the USA (SHLEIFER and VISHNY, 1997).
elaborate question (MICHAELS, 2009a). On the other hand, the best solution to be found tends to
Bias also arises from the choice of categories analyzed:
least through other approaches that complement the reductionism of codifications
embedded in a legal framework. Michaels (2009a) maintains that this bias can, on the one hand, be
of one legal system over another, but rather of one discipline over another – what he calls
deeply understood when isolated from other factors such as history, politics, quantitative (MICHAELS, 2009a). The complexity of the law makes it impossible to be
manifest through the tendency to encourage issues posed by the legal system itself
economists – the questions raised are not legal in nature, but economic.
“economic bias”. Considering that the economic theoretical basis used in the research is
a given object, of neutral description, also ignores the asymmetry of its effects for the parties
Not only do norms have to be read within a context: the observer himself
Michaels (2009a) highlights that this worsens the problem of bias – not in the sense of superiority
affected by it (MILHAUPT and PISTOR, 2008).
31
analyzed based only on the presence or absence of specific rules in formal norms
should be questioned about a possible bias resulting from being himself
to be precisely that already internalized by the observer, about which he has greater knowledge.
indicators are not neutral, as they reflect previous conceptions of the role of law and
(MICHAELS, 2009a).
Because the authors of Law and Finance are not lawyers – the four are
its relationship with the law, which may be a reflection of its own ideology, such as the
economic neoliberalism (KREVER, 2013). Likewise, the perception of law as
economics and the social sciences (SIEMS, 2005). Therefore, the functional approach clashes with
domestic. In this way, the legal system in which the observer finds himself may appear to have
American origin and was developed within a US legal context, “the bias towards the economy would
easily become a bias in favor of American law”43 – an example of this would be the emphasis on
the rights of minority shareholders44 .
the methodology used in the first works of the Law and Finance literature: the law
the best legal solution to a given problem simply because it responds precisely to the
Machine Translated by Google 45 Reitz (2009) states that he himself reached conclusions similar to the origins literature regarding a more intrusive and regulatory conception of law in civil law compared to common law. (pp. 849) – results obtained in the study Political Economy and Abstract Review in Germany, France, and the United States (1999).
it by itself, which requires a non-quantitative theoretical framework to explain the relationship between
numbers offer, the use of numerical metrics as an analysis method is also
about the origins would be beneficial not only by enriching the discussions that come to
of law depends not only on knowledge of the physiology of the legal system, but also on the
quantitative analysis (KREVER, 2013). Despite this, studies such as La Porta et al. (1998) and
to perceive a certain institutional deterioration in that country.
of traditional jurists, but also for the possibility of confirming qualitatively formulated theories45 .
indicators formed from data on the perception of companies, business leaders and
that followed La Porta et al. (1998) can be very useful to comparative law (SPAMANN,
qualitative studies, such as the classification of legal families. By the way, this author, when citing Tufte
The quantification of the right is also contested based on the possibility, or not, of the
emerges as such perceptions of the legal-regulatory environment are influenced by
any adjustments made by scholars capable of recognizing the uncertainty of the law and the
organizes the data in such a way as to make any causality clear, however, it is unable to prove
objective descriptions. Combined with the appeal of objectivity and credibility in the judgments that
sense, Krever (2013) cites Ocampo and Vos (2008), who would have noted that the perception of the rule
(MICHAELS, 2009a). Reitz (2009) states that the use of quantitative methodology by theory
economic performance of the country – when an economy was in crisis, there would be a tendency
deal with the available data, bringing the challenge of demanding alternative explanations of the method
associated with rigor and universality – even critics do not disagree with these virtues of
others that were inspired by it, such as the World Bank's Doing Business , make use of
Despite the criticisms made, the use of large-scale quantitative research such as
Reitz (2009) also recalls that the literature on origins itself is based on
32
2009a), although the benefits of these research models are conditioned to
(1974), points out that the product of quantitative research – the statistical analysis of correlations –
other subjects of civil society. For Krever (2013), the problem in managing these indicators
complexity of the legal social phenomenon can be subjectively perceived and summarized as
ephemeral characteristics or not belonging to the legal system of the society analyzed. In that
existence of functionally equivalent institutions within the same jurisdiction
Machine Translated by Google Reitz (2009) cites the work of Milhaupt and Pistor (2008) who, using exclusively qualitative methods, study how six countries responded to the challenges of the 2008 global financial crisis. According to him, this highlights a certain bias on the part of legal academics comparative, in the sense that there is rejection of the quantitative method. In the same sense, Michaels (2009b) maintains that there is an opposition between the current tradition of Comparative Law in proceeding with detailed descriptions of jurisdictions against the possibility of statistical measurement of differences between countries. Siems (2005) assumes that law, as a complex system of dynamic and chaotic rules, is not capable of being divided and analyzed based on smaller categories. As a result, any analysis that does so is incapable of understanding irregularities and disorder, and is therefore superficial. On the other hand, the author highlights that this is also refutable, since statistics are also used in other areas of knowledge that study human behavior, such as psychology and political science.
46
47
al. (2008), maintains that the normative variations between the different jurisdictions of the world are
general. In short, comparativists claim that this is not an opposition between methods46
household); and (vi) the limitation of conclusions arising from statistical analyses, which do not
variables improved through qualitative analysis of their effects on the legal system,
2009; MICHAELS, 2009b; SPAMANN, 2009a).
six beacons that can avoid mistaken results resulting from the use of methods
,
according to which comparative research in law should observe certain limits in the use of the
descriptive data; (ii) methodological care, which includes awareness of the limitations of
. An example of this would be ADRI itself,
causality. Siems (2005) agrees with the virtue of numbers to reduce the complexity of
misinterpretations of results
selected variables; (iv) comparability, with an emphasis on insufficiency and impossibility,
The second proposition of the theory about origins, as explained by La Porta et
comparative research, specifically, and the practical value of comparative law, so
by Spamann (2010), a legal and comparative academic, had the accuracy of his
bias of favoring the rules of greater knowledge on the part of the observer (rules
as seen above. As a possible remedy to these potential errors, Siems (2005) highlights
rarely just mean a starting point for further research.
but of a complementary relationship to be better explored (SIEMS, 2005; REITZ,
Although there is a relationship of mutual benefit, arguments can be found in the literature
quantitative comparisons: (i) the strict necessity, in order to avoid an excessive volume of
33
numerical comparison; (iii) transparency, mainly in the description and justification of the
2.1.2. Legal families: systematization and obsolescence of the debate
quantitative method. Seims (2005) points out that this methodological reductionism can lead to
data on empirical reality and therefore increase the usefulness of the results of a
originally elaborated by La Porta et al. (1998), which, revisited in research undertaken
often, comparison between norms; (v) the search for functional equivalents, to avoid
47
Machine Translated by Google 48 CABRELLI and SIEMS, 2015, pp. 124.
specific and consistent theory. As this theory asserts that the growth of law is
qualitative aspects of comparative law regarding the classification of legal families (REITZ, 2009;
the adoption of a certain legal norm and the success of this reception depend on
The theoretical basis for this is found in La Porta et al. (1996), who refer this
The articles by La Porta et al. (1997, 1998) classify the 49 countries in the sample into four
and classification of jurisdictions from secondary sources such as language compilations
and SIEMS, 2015).
law of Scandinavian tradition. Common law countries make up a sample of 18 countries,
Watson's (1974) theory of legal transplants holds that the law is not
not only to comparative law, but also to legal sociology. This occurs to the extent that
systematic and are due to the historical origins of the national legal system, with a certain
Brazil, Philippines and Belgium. There are six countries identified as belonging to the civil tradition
other countries (LA PORTA et al. 1997, 1998, 2008). Cabrelli and Siems (2015) explain that, for
view of law as a mere reflection of society or some of its aspects in a
theory about origins has arisen from quantitative studies, the theory rests on methods
Scandinavian law – Sweden, Norway, Denmark and Finland.
jurisdiction in another, because “law is conceived there as an autonomous phenomenon and distinct from
the social, cultural, economic and political environment in which it operates”48 . As a consequence, both
mainly explained by factors internal to it, there is the extraordinary persistence of
three-frame classification: the theory of legal transplants, the reception of legal families
much more from internal factors of the legal tradition than from contextual factors (CABRELLI
GAROUPA and PARGENDLER, 2014).
categories: common law, civil law of French tradition, civil law of Germanic tradition and civil law
English.
Ewald (1995) advances these ideas: Watson (1974) allows a revolutionary notion
34
usually written out of the blue, but rather the result of voluntary transplants, or not, of the right to
that the theory of legal transplants discards what Ewald (1995) calls “mirror theories”, the
such as Canada, Malaysia and Israel. The civil law countries of the French branch include 21 countries, such as
superior economic performance by common law countries . even though the
German law , including Japan, South Korea and Switzerland. There are four countries with a civil tradition
this approach, there are no social difficulties in copying norms from a given
Machine Translated by Google 49 Based on the advancement of Law and Finance literature, in order to identify that the influence on the origins of law is not restricted to finance, the works that followed La Porta et al. (1998) stopped highlighting voluntary adoption, instead emphasizing only the involuntary adoption of legal transplants, which would reinforce the exogenous nature of the origins.
In this sense, specifically in relation to commercial law, Roger Cotterrell (2001)
impossibility of reducing the right to another discipline, never claimed that the right is
as well as (ii) that those who adopted voluntarily did so considering
legal cultural.
relationship would be complex – Watson (1974) insists, moreover, on the notion of law as part of culture
as a solution to the problem of endogeny: good legal institutions and development
specifically the legal protection given to investors49 (LA PORTA, et al, 1998, 2008).
simple and direct, even if superficially. Any study of the interaction between society and
(GAROUPA and PARGENDLER, 2013). This problem implies that any differences between
as an exogenous variable with an impact on the economic environment. La Porta et al. (2008)
laws, although there is variation in the social context in which they operate - therefore, the reduction
legal systems and social changes, but also processes internal to each of these spheres
explained by exogenous factors (LA PORTA et al., 1998), such as political economy, culture and
as an explanatory variable, and not an instrumental one (of an exogenous nature).
Still, Ewald (1995) observes that Watson, although he defended the
of transplantation theory, by emphasizing positive legal rules at times, at times indeterminate ideas of
would have involuntarily adopted, via conquest or colonization, the legal system of other nations,
maintains that it is an instrumental right (as opposed to cultural branches, such as the right to
Still, the use of transplant theory is made by La Porta et al (1997, 1998)
broader concerns, such as linguistic proximity and political importance, than
totally disconnected from economics, politics, philosophy or society. Instead, this
(COTERRELL, 2006). Watson's ideas would imply the impossibility of causal relationships
economic may suffer mutual influence, with possible causality in both directions
As a result, the legal tradition to which a given jurisdiction belongs could be investigated
35
the characteristics of financial markets, in particular, and the economy, in general, are
highlight that more recent studies in the Law and Finance literature use the legal tradition
law, therefore, should take into account not only reciprocal influences between
from law to sociology, economics or politics would be just an illusion (EWALD, 1995).
(EWALD, 1995). For Cotterrell (2006), this position of Watson (1974) reveals the ambiguity
religion. To remedy the issue, La Porta et al. (1998) argue (i) that most countries
Machine Translated by Google 51 50
52 LA PORTA et al., 2008, pp. 286. LA PORTA et al., 2008, pp. 288. In fact, the concept of “origins” appears to have been imported from Merryman's (1985) concept of “legal tradition”, which proposes a conception of law as a partial expression of social culture, including a notion of both law and a set of historically rooted attitudes about the nature of law and about its purpose and form of operation. Merryman (1985), however, is quoted by La Porta et al. (1998, 2008) solely as a source for classifying legal traditions.
but rather as “a style of social control of economic life (and perhaps other aspects of life)”50 . This new
definition includes content beyond the positive law [or “basic legal infrastructure”51 human capital of the
mother system52 .
Porta et al. (2008) recognize that cultural, political, economic and other factors
family and administrative law) relatively culturally neutral, as it is
those only emphasize the possibility of rejection of transplants by the jurisdiction that
Nor would beliefs and ideologies be embedded in these laws. Michaels (2009a) illustrates this fact
would be a right with less chance of rejection of possible transplants by a intrinsically linked to economic interests and not to habits and emotions. Therefore,
has adopted (CABRELLI and SIEMS, 2015).
Michaels (2009a) observes that legal rules are compatible with different
with Germany during the 20th century, which went through five political regimes with characteristics
jurisdictions around the world from the legal traditions that provide the laws and codes
Legrand, state that every legal transplant is refined and reshaped by context and
ideologies, as the transplantation of laws from one system to another does not involve human capital,
transplanted (LA PORTA et al., 2008).
36
This use of the theory has not been immune from criticism. Cabrelli and Siems (2015) divide the
local jurisdictions, with little room for any real meaning in the expression “transplant”,
according to La Porta et al. (2008)]: ideology, general styles of the legal system and
local characteristics are responsible for adapting and individualizing legal systems between
opposing scholars into contextualists and culturalists. While these, led by Pierre
,
yes. This process of individualization, however, is considered by them insufficient to
eliminate the basic elements of every legal tradition. This would allow the classification of
jurisdiction contextually distinct from that which gave rise to the transplanted law
However, a new problem arises when La Porta et al. (2008) define “origin
radically different, while the law remained practically the same. Despite this, La
(CABRELLI and SIEMS, 2015).
legal” no longer as legal transplants that refer to common law and civil law traditions,
Machine Translated by Google La Porta et al. (1996, 1997, 1998, 2008) made use of Merryman's (1969) characterization of civil law. According to Merryman (1985), French law, because of its revolutionary roots, and German law, due to the influence of German jurists, would not be representative of the civil law tradition (apud MALMENDIER, 2009, pp. 1100). 54 53
Germanic, Anglo-American, Nordic, Far Eastern, Islamic and Hindu (PARGENDLER,
basically around the dichotomy between common law and civil law. According to La Porta et al.
French and Germanic traditions, as two of several possible subclasses of the civil law. Yet
of the area – in three other branches: French branch, Germanic branch and Scandinavian branch. Furthermore,
as founded on the use of codes and formal written laws as primary legal sources, with
chose secular legal traditions. This was done under the justification that the inheritance
thus, Merryman (1985) declared these traditions to be unrepresentative
in turn, originating from English law, aggregates jurisdictions in which the judge is called upon to resolve
Although La Porta et al. (1998) allude this quadripartite classification to Merryman
In fact, La Porta's classification (1998, 2008) is closer to Zweigert and
The second milestone was the acceptance of the categories of legal families, as
scholars in civil law (LA PORTA et al., 1998).
same authors. On the one hand, David and Brierley (1985) made use of a tripartite division of the
thought, legal sources and ideology, divide jurisdictions in the world into Romanistic,
et al., 1996, 2008). The classification of the 49 jurisdictions contained in the initial sample was performed
categories, as they branch the civil law - claiming to be a typical classification of scholars
Merryman (1985) carries out a tripartite division, in which he highlights the common law families and
2012a).
although the authors recognized the prevalence of religious legal traditions in some countries analyzed, such
as India and Pakistan, La Porta et al. (1996, 1997, 1998, 2008)
(1998), the civil law, or Roman-Germanic tradition, originating from Roman law, has been described
relevant participation of jurists in the formulation of legal dogmatics53 . The common law, for
colonial status of these countries was more determinant on commercial law.
(MALMENDIER, 2009).
37
(1985) and David and Brierley (1985), this division was not exhaustively applied by these authors.
Kotz (1998). These authors, when using as a criterion a combination of history, mode of
specific disputes. In common law the body of precedent supersedes the relevance of
proposed by David and Brierley (1985), Merryman (1985) and Zweigert and Kötz (1998) (LA PORTA
However, La Porta et al. (1998, 2008) classify countries not into two, but into four
western law, in Roman-Germanic families, common law and socialist families. For another,
54
Machine Translated by Google Conversely, see Legrand (1996), apud Pargendler (2012a).
Pargendler (2012a) states that Beviláqua would have adopted a classification in which the Latin American systems as a fourth group, in addition to the three grouped by Glasson (1880), according to the influence of Roman law – they would be the Neo-Latin, the Germanic (a category that would include the United States and the United Kingdom) and Scandinavians. In Glasson's classification, there is no division between civil law and common law. See also Garoupa and Pargendler (2014).
55
56
legislation of each country (LA PORTA et al., 1996).
Pargendler (2014), classification does not claim to be static and timeless.
. Incidentally, the decline in relevance of this dichotomy in recent decades
despite the fact that the perception of differences between English and French rights is old, the categorization
al. (1998) not only made use of sources little used by jurists, but also did not
study on the history of the taxonomy of jurisdictions in comparative law, raises a bias
as a discipline in 1900. The dichotomous perception of legal traditions between common law and
including Kötz (GAROUPA and PARGENDLER, 2014).
scholars to confer independent group status on the legal system of their respective
of the twentieth century, with the work of David (1963) and Zweigert and Kötz (1969) (PARGENDLER,
et al. (1997, 1998, 2008) based on data collection obtained from sources in English on the laws and
The support of the quadripartite classification used by La Porta et al. (1998, 2008) on
Brazilian jurist Clóvis Beviláqua, who, in 1893, grouped the legal systems of America
among comparativists about the few differences that still justify the dichotomy between
as a source Reynolds and Flores (1989), who compiled the main
carried out is not considered exhaustive nor is it universally accepted. for grouper and
Putting this classification into a historical perspective, Pargendler (2012a) observes that,
Regarding the use of secondary sources in English, Spamann (2010) highlights that La Porta et
in distinct legal families has varied greatly since the establishment of comparative law
recent studies reaches the point of being treated as obsolete by a relevant portion of comparativists,
Specifically, regarding the subdivision of the civil law tradition, Pargendler (2012a), in his
nationalist on the part of comparative jurists. For her, there is a tendency on the part of these
civil law would be relatively recent, from the end of the 19th century, presenting its apogee in the middle
The third milestone is the classification of the countries that participated in the La Porta sample
38
2012a). Regarding more recent times, Spalmann (2009b) mentions that there is a growing consensus
commercial codes of jurisdictions around the world. Particularly, the authors used
countries, such as what happened with the Germans Zweigert and Kötz, with the Frenchman René David and even the
Comparative law literature has not been without criticism. For Malmendier (2009), the division
Latin America in an autonomous category of continental European law55 .
civil law and common law 56
Machine Translated by Google “law in practice”.
systematics between these two traditions. Malmendier (2009) stresses that legal systems
involved them in data collection. It states that, in this way, they restricted information from the
rights. Consequently, they argue that, for economies in transition, the impact of the “right
especially in commercial law, transplants and legal revisions of this type have always occurred,
they were restricted to the perception of the compilers of secondary sources; (ii) language barriers research in two harmful ways: (i) relevant data on corporate governance
in practice” is much greater than that of “law on the books”. On this point, La Porta et al.
law of French tradition, but which adopted common law rules in its commercial law of 197758 . In
these cases, researchers have placed greater emphasis on the origin of commercial laws and not on
which blurs any strict division between civil law and common law, on the other hand, La Porta et
which in itself was and is dynamic (MALMENDIER, 2009).
(1998) to transition economies, with an emphasis on Eastern European countries, concluded that
to the most recent revisions. In this regard, on the one hand, Vagts (2000) criticizes the fact that, 39
regarding data from civil law countries.
the collected data, what they called “law on the books”, offered investors a protection different from
that perceived from indices on the effectiveness57 of these same
La Porta et al. (1998) admit that some jurisdictions in the sample do not belong as
are dynamic and change over time, as well as the very origin of civil law, the
Pistor, Raiser and Gelfer (2000), in turn, when extending the research by La Porta et al.
clearly to a given legal tradition. An example would be Ecuador, included in the civil group
Roman legal system, migrated from an adaptive case-based system to a nonadaptable during the Roman Empire. Therefore, it would be inappropriate to take as fixed a tradition
of compilers may have made it difficult to understand and describe foreign systems,
(2008) respond that, although some indicators reflect only the “law of the books”, others
al. (2008) argue that mutual influence and possible convergence do not rule out differences
which, for Spamann (2010), may explain the greater lack of accuracy he verified by
were also built based on experience, which also tends to incorporate part of the
Pistor, Raiser and Gelfer (2000) used data from the European Bank for Reconstruction and Development (EBRD) and the Central European Economic Review, a journal specializing in political and business coverage of Eastern and Central Europe. La Porta et al. (1998), pp. 1119. 58
57
Machine Translated by Google better investor protection, more efficient credit recovery and low participation
in pro-market and civilist actions in the implementation of public policies. This statement
that deal with the capital market, shareholders and corporate governance and (ib) those that
Law and Finance literature in these three groups: (i) studies that focus on the impact of
subsequent research, which empirically confirmed perceptions of
investigations into the impact of the level of state regulation on economic activities
all the criticisms outlined above regarding the assumptions of data collection by the research of the
that followed verified the influence on the origins – still in the initial sense given, of
level of unemployment, barriers to business creation and dispersion of ownership of means of
point to the association of civil law with: less protection for creditors and shareholders; any less
2.1.3. Expansion of the concept of origins: social control and ideological nature
institutional design of the Judiciary, as well as state regulation of the economy (LA PORTA et
institutions of the Judiciary, as well as these on property rights and respect
per capita income and greater productivity growth, in turn, would be related to
found in the civil law and common law traditions is due to the focus of the Anglo-American tradition
La Porta et al. (2008) aggregate the results achieved so far by research into
Regarding the impact on investments, research is divided between (ia) those
right to investor protection and financial development and growth; (ii)
are dedicated to analyzing the impact on the banking system and the credit market. Despite
does not only follow from the initial work of La Porta et al. (1997, 1998), but it is a product of
Hayek (1960)59 on the most relevant characteristics of these two systems. The investigations
specific issues, as well as on other economic issues, such as the job market,
Law and Finance literature , the results of these studies, according to La Porta et al. (2008)
40
communication; and (iii) studies on the impact of legal tradition on the characteristics
efficiency in credit recovery; greater state involvement in the banking system. Bigger
transplantation of laws from legal traditions – would not be restricted to finance, but would reach the
The third proposition of the theory on origins argues that systematic variation
al., 2008).
of private contracts.
Hayek (1960) suggests that the differences in the conception of economic freedom found in the civil law and in the common law, with decisive consequences for the performance of their economic ones, result from their respectively rationalist world views, in which freedom is attainable only through the search for a social, and empiricist, objective, according to which freedom is seen as the result of state abstention and the flow of spontaneity.
59
Machine Translated by Google this, it was possible to establish a system of independent judges, without risk of
carried out in different sectors: entry of new companies into the market, means of
belong to a fourth category of studies, far from the observation of empirical data and more
would tend to have less unemployment.
combined with the concentration of power in the hands of local forces. This prevented the consolidation of a
of civil law, a higher level of barriers to companies entering the market, greater regulation of the
assume that judicial independence and judicial control of constitutionality are aspects
law (MALMENDIER, 2009; XU, 2011). For Glaeser and Shleifer (2002), the differences
centralized in the State – at the time, the royal figure (GLEASER and SHLEIFER, 2002).
while higher per capita income was found to be linked to less regulation and less
higher levels of economic freedom, even though differences in political freedom
twelfth and thirteenth centuries, when there began to be a distinction between two forms of protection for decision-makers
government in the banking system. Civil law countries would be more interventionist, with
state regulation with higher levels of corruption and more informal economy. Regarding the
procedural formalism is greater in civil law countries , which was also linked to greater
environment of lower risk of coercion, less concentration of power in local authorities. Per
Regarding the level of regulation, La Porta et al. (2008) highlights studies that were
work and lower spending on social security than civil law. On the other hand, the common law
In addition to these three currents of study, it can be said that Glaeser and Shleifer (2002)
subversion by local interests. In France, on the other hand, there was the bellicosity of the region
Regarding the institutional design of the Judiciary and its practices, La Porta et al. (2004), when
related to the theoretical-historical investigation of the reasons for the superiority of the common
communication, job market. In these sectors, the results identified an association
Justice independent of the interests of these gentlemen, which fostered a more
job market and greater state participation as owner of media outlets,
important aspects of economic and political freedom, observe that common law countries have
systematics found between the two traditions, common law and civil law, originate from the
41
have been insignificant. Study by Djankov et al. (2003) also identified that the
against the coercion of the litigants, whether through violence or not. England offered
State participation in the media. Furthermore, a correlation was also verified between more
governments with lower overall performance, according to La Porta et al. (1999).
labor market, it was identified that common law would be associated with less protection of
expected length of proceedings, more corruption and less fairness in judicial decisions.
Machine Translated by Google civil law would increase state intervention, on the other hand, common law countries would strengthen
design of the Judiciary, its formalism and the speed of adaptation to changes in reality
PORTA et al., 2008).
on the origins emphasized the political mechanism, to the point of becoming one of the four
By adopting such a proposition, the theory about origins, for Graff (2008), highlights its
prioritization, or not, of private property over state action (GRAFF, 2008). In theory
It gains emphasis in La Porta et al. (2008) the point of view of Djankov et al. (2003), for
civil law and common law are due to these two distinct styles, each employed by a
like Hobbes' Leviathan, in the sense that the state entity always tries to take part in
ceased to be analyzed in an equivalent way, as in Beck, Demirguç-Kunt and
disorder and in which state control confers order, but also risks abuse of power, the
state-owned. As a consequence, the theory about origins would not only have an explanatory character
From these four types of studies, two species of
historical explanation of differences found between civil and common law – adaptability
relating to one or another risk in the search for solutions to society’s problems. While the
forecasting how countries would behave in times of crisis: on the one hand, countries of
adaptability mechanism (BECK and LEVINE, 2003). While this relates to the
liberal revolutions of the 17th to 19th centuries, Glorious and French Revolutions. On the other hand, the theory
law prefers solutions that avoid State abuse rather than the risk of disorder (LA
market mechanisms (DJANKOV et al., 2003; LA PORTA et al., 2008).
propositions that support this theoretical building.
Thus, the theory about origins states that the systematic differences found between
economic, the former refers to the distinct preferences of legal traditions about the
rooted in contemporary orthodox economics. This vision of the economy conceives the State
about the origins, however, as stated by La Porta et al. (2008), the mechanisms
who, in a tradeoff context where market failures pose a risk of unwanted
tradition, of dealing with social and economic problems, one pro-market and the other pro-regulation
society's resources, negatively interfering in the economic activity of agents
42
differentiating criterion of the styles of control of each legal tradition is the biggest concern
differences present between the data collected in comparative studies, but it would also imply
Levine (2003). On the one hand, the adaptability mechanism was relegated to a role only of
mechanisms through which the law influences the economy: the political mechanism and the
became a competing historical explanation with the explanation focused on the role of
civil law is more concerned with disorder relative to the risk of state abuse, the common
Machine Translated by Google according to Glaser, Scheinkman and Shleifer (2003). As an example of the advantages of civil law in
any causal inference of the relationship between legal institutions and financial development, as verified
by La Porta et al. (1998)61 , to accept a milder view of this
(GRAFF, 2008). As an example, Beck Demirguç-Kunt and Levine (2003) assume that the largest
absolute superiority of the common law. State regulation arising from civil law can be more
evidence that civil law countries establish climate change policies more
financial development, as they presuppose that a powerful state would have the possibility of support for state activism by civil law has adverse implications for the
efficient in its regulatory solutions instead of offering only the mere legal support of the
that civil law countries have lower deforestation rates compared to
stricter than common law countries.
since English law would prefer to limit state action (GRAFF, 2008).
those of common law. Also in this sense, Fredriksson and Wollscheid (2015) find
43
competitive. For Graff, (2008), such a conception of the State would imply the superiority of the common
However, La Porta et al. (2008) point out that the theory of origins does not stipulate a
regarding regulatory policies, Marchand (2012), when testing the hypothesis that differences in
link: legal rules matter for economic-social performance, with
law over civil law regarding financial development and good economic performance,
deforestation can be attributed to the origins of each country's legal system, finds
superiority of one system over another only in a relative way and conditioned on
certain circumstances, such as the level of disorder in the market (LA PORTA et al., 2008).
easily change the right in your favor and thus manipulate the distribution of resources according to
market, except when state action can be subverted by private interests (LA
For this reason, the enunciation of the fourth proposition of the theory on origins abandons60
its own objectives, which would be at odds with the conception of a financial market
PORTA et al. 2008) – which would be especially worrying in developing countries,
For Michaels (2011), the reason for this departure from the causality of law lies in the level of criticism directed at the initial statement by La Porta et al. (1998) that common law legal institutions would be more conducive to economic growth. Even though they found robust correlations between legal traditions – common law and the three –, investor Porta et al. (1998) protection, enforcement of legal rules and ownership structure, variations of civil law observe a causal relationship only in the sense that French civil law causes concentration of company ownership (pp. 1151).
60
61
Machine Translated by Google the new definition's emphasis on current systemic aspects weakens the theory because
economic. As stated above, this involves refining the conclusion initially reached
that common law is an absolutely superior system in terms of economic growth
economic: the common law approach would be more appropriate in times of calm, of
legal over the other, to embrace the relative advantages of each, depending on circumstances
offered by civil law would work better in the face of threats of war, financial crises
from being the result of legal transplants (LA PORTA et al, 1998) to becoming a kind of
La Porta et al. (2008) maintain that the origins would only determine distinct designs
the increased use of common law solutions by civil law countries , and vice versa, for example
Michaels (2009) highlights that the new definition of legal origins would be much more
2.1.4. Impact of law: economic performance and varieties of capitalism
organization of production, and the civil law model , coordinated and guided by state guidelines.
United States and with the pressure to reduce regulatory barriers in the labor market in countries
(1999), than with the law itself. Reitz (2009) argues that the new definition of legal origins would
have much more to do with political economy62 . Pistor (2009) notes that
between legal rules adopted in different countries would be relevant to the performance
Porta et al. (2008) state that one or another model would be linked to better performance
However, the abandonment movement by La Porta et al. (2008) of the idea of
intensification of globalization and integration of financial markets, while solutions
was also accompanied by a softening of the definition of legal origin – which left
by La Porta et al. (1998), with abandonment of any absolute superiority of a system
historical.
and other extraordinary shocks. A third way would be the convergence of the two systems, with
“social control of economic life” (LA PORTA et al, 2008, pp. 286).
44
of what happens with the adoption of more regulatory legislation in post-crisis times by States
identified with the political position of a government, as defined by La Porta et al.
of capitalism: the common law model, aimed at a type focused on the market as a means of
The last proposition of the theory about origins maintains that the differences found
Thus, faced with a context of economic growth interspersed with times of crisis, La
of civil law (LA PORTA et al, 2008).
Reitz (2009) uses his own definition of political economy: “the standard spectrum that runs from the most state centered political economies of state socialism and the command economy on the left to the true laissez-faire state at the extreme right or market- centered side of the spectrum” (pp. 855). 62
Machine Translated by Google diagram that shows the channels of influence of the origins on legal institutions and of these
of the problem of endogeneity between law and economics (there would be reverse causality, as the
this aspect to an economic institution, such as economic growth, larger economies
in turn, observes that the movement to expand the concept of legal origin results in a economic development would affect legal norms and practices). Pargendler (2012b), by
informal and economic freedom. For example, the Law and Finance strand of the theory on
that links origins to a specific economic, social or legal aspect, such as
45
absence of any direct link between economic origins and institutions. grouper and
financial development, level of bureaucracy or judicial independence, and another that associates
about economic institutions. This illustration is below with adaptations:
Pargendler (2014) remember that the theory about origins was conceived in two stages, one
practically unfalsifiable statement, moving away from the Popperian63 sense of theory.
origins would associate origins with financial development which in turn is associated with
The conclusion of the theory of origins deserves two remarks. The first refers to
economic growth (HARRIS, 2008). In this sense, La Porta et al. (2008) present
See Section 1.2. 63
Machine Translated by Google of a society, as well as on the set of solutions available to resolve
originally outlined by La Porta et al. (1998): increases in legal investor protection
at the micro level they are directly related to the development of financial markets
of social problems, as also defended by Djankov et al. (2003).
The second observation refers to the fact that the big idea of the theory is not
(PISTOR, 2009). This conception is based on the assumption that the market would be the sum of
However, especially in relation to financial development, despite
superiority of one system, but rather the effect of systemic and persistent style differences
individual contractual relationships, disregarding the complexity of both the current features of the
changes suffered by the main thesis, La Porta et al. (2008) keep the link unexplained
46
of regulation between the two systems, civil law and common law, on the institutions and purposes
Performed:
Corporate Law
Legal Institutions
structure of
Financial
DJANKOV et al., 2002
Independence
Firm
bankrupt
LA PORTA et al., 2000
Freedom
right of
private credit
Figure 1 – Associations between Legal Institutions and Economic Institutions according to Law literature
LA PORTA et al., 1997, 1998
level of corruption
Origins
Source: own elaboration based on La Porta et al. (2008)
Studies
LA PORTA et al., 2002.
Valuation of companies
Development
LA PORTA et al., 2004
owned by
Affected Institutions
Right
BOTERO et al., 2004
Judicial
Barriers to market entry
State ownership of banks
LA PORTA et al., 1999
economical
Work
Economy interest rate
and Finance
DJANKOV et al., 2007.
unemployment rate
Machine Translated by Google also whether the richness and quality of laws are due to a third factor (SPAMANN, 2010;
Kevin Davis, on a panel at the 105th Annual Meeting of the American Society of International
of reverse causality as possible omission of other explanatory variables (hypothesis of
The topics below explore the main reflections on each of these three
possible interpretations of the results verified by the Law and Finance movement. A
2.2.1. Theory of origins as an explanatory theory
Reverse causality occurs when the laws of a country improve as a result of
last decades. The second is related to its predictive capacity to associate certain
country's past, for example between 1960 and 2000, based on the legal system adopted. Treat
economic development (PISTOR, 2009). In other words, even if one takes
market, permeated by multiple agency costs, and the law itself, incapable of being
or another rule of one of the great systems, civil law or common law. The third highlights its
(MILHAUPT and PISTOR, 2008). However, the method they used based on regressions
these nations are rich because they have better laws or if they have better laws because they are rich, or
2.2. Tripartite interpretation of the theory of origins
economic development.
variables, failure to provide reliable estimates of causality, because of both the problem
MICHAELS, 2009a). However, through the use of least squares regressions
interpretive prisms.
multicollinearity) (XU, 2011).
Law (ASIL), dedicated especially to the analysis of the theory of origins64 , maintains that there are three
The first refers to its explanatory capacity regarding the development of countries in
Davis points out that the explanatory version of the origins theory justifies the performance
political pressures from certain interest groups, whose power increases because of the greater
47
whether from a relationship assumed by LLSV in the unidirectional sense, from law to economy
It is true that the most developed countries have the best laws, it would be difficult to determine whether
empirical results, such as financial development and level of corruption, to the adoption of a
reduced to the enforcement of contracts and property rights (PISTOR, 2009).
normative bias, when determining what countries should do to improve the
with ordinary least squares, despite identifying the strength of the relationships between two
Panel Legal origins, Doing Business, and rule of law indicators: the economic evaluation of legal systems, held on March 24, 2011, Washington DC, United States. 64
Machine Translated by Google for investments in the face of increased protection of investors' property rights,
It is characterized by a complex endogeneity, with emphasis on legal responses constructed in
contexts of crises and economic growth65 . According to all these authors, the
ordinary two-stage studies, Law and Finance studies were incapable of
Porta and the co-authors of Law and Finance assume that the market is equivalent to
market members and informs ex ante the behavior of investors, thus
influence of origins is the legal system (XU, 2011). identify the existence, or not, of this third factor, nor to affirm that the only channel of
sum of the individual contractual relations of each company, as well as it with its
In fact, Pistor (2009) goes further: specifically regarding investor protection, the
law would determine the mode of market growth. Along the same lines, Berkowitz, Pistor
As seen above, Pistor (2009) observes that, in origins theory, causality
law, by offering more safeguards to investments, also presents incentives to
48
of law on financial development is asserted rather than explained. For the author, La
financial markets, even more so when contemporary markets are characterized by
real dynamics between legal institutions and economics denies the perspective of endowment of law
greater complexity than the mere sum of its agents (PISTOR, 2009).
Reverse causality challenges theory about origins, as illustrated below
investors. Although the origins theory explains how there would be an increase in incentives
and Richard (2003a) and Milhaupt and Pistor (2008) argue that the relationship between law and economics
from Graff (2008) and Xu (2011):
there is no demonstration of how this would necessarily imply the development of
65
Figure 2 - Interpretation of the theory of origins as an explanatory theory
Hypothesis explaining the theory of origins
Legal origin ÿ Legal rules ÿ Financial development ÿ Economic Growth Reverse causality hypothesis Legal origin ÿ Financial development ÿ Economic growth ÿ Legal rules Source: Own elaboration, based on Graff (2008) and Xu (2011) .
Especially regarding the regulation of financial markets, Gerding (2013) maintains that this law/economics endogeneity would be marked by the existence of “regulatory cycles” (or “regulatory instability hypothesis”) that accompany economic cycles interspersed with crises and periods of growth. These regulatory fluctuations would be responsible for the deterioration of financial regulation during times of extraordinary growth (speculative bubbles), in five stages that involve: stimulus regulations; loosening of compliance with regulatory rules; regulatory arbitrations; pro-cyclical regulations and pro-'herd behavior' regulations (GERDING, 2013).
Machine Translated by Google The problem of the correlation of multiple variables allows us to ask whether legal rules
market participants with the emergence of new demands for legal solutions.
(MILHAUPT and PISTOR, 2008). Corroborating this importance, Coffee (2001) proved that
Economics and Law.
truly independent, a factor that can go far beyond the law (COFFEE, 2001).
jurists, however, still remains a complex not understood. Deakin and Siems
regressions run by LLSV. In this sense, Licht, Goldschmidt and Schwartz (2007) observe
aid of strong legal protection of investors, which would have occurred thanks to institutions
candidates, such as the initial conditions of the colonies (colonial origins) where they went
legislative changes suffered by ten jurisdictions during the last decades, reached ambiguous
conclusions. In some cases, such as Indica, there was a significant correlation between the
economists. In this sense, Milhaupt and Pistor (2008) argue that LLSV is assumed to be the
of economic agents. An example of this would be the practice in the United States and the United Kingdom
of Law and Finance, in which the legal system is presented as a fixed datum, a
as in the case of the United States in relation to the profound alterations promoted by the Law
informal structures that shape economic activity, such as codes of conduct for better
administrators, even though there is no legal rule in both countries.
rolling relation between legal responses to economic problems and generation of incentives to
and Siems (2010) point out that there is still little understanding of the endogeny between Politics,
identification of these non-legal mechanisms and their fitting into formal mathematical models
that protect investors, for example, would not be mere products of a variable
Another problem refers to the possibility of omitting an explanatory variable in the
United States and the United Kingdom managed to develop their financial markets without the
The endogenous relationship between economic, political and legal factors, for others
Studies parallel to the development of Law and Finance literature offer potential
(2010), using comparative research methods and encoding the
that informal social institutions can have a relevant and totally ignored role by
informal, which, despite not being judicially applied, condition the behavior
49
law the only source of discipline in social life, devaluing the existence of norms
United Kingdom, that the majority of a company's board of directors be independent of
quality of law and financial development over time. In others, there was not,
sterilized social infrastructure. Instead, the appropriate model approximates a
Sarbanes-Oxley, US response to the Enron scandal in 2001. For this reason, Deakin
governance practices. This complete disregard is attributed to the difficulty of
Machine Translated by Google 66 Countries former members of the socialist bloc, mainly from Eastern Europe, such as Poland, Ukraine and Russia.
characterized, however, as a mere tool of a political nature, which would be highlighted in the civil
receive these same transplants. Such receptivity would be associated with contact with the system
(STULZ and WILLIAMSON, 2003).
different societies, with a profound impact on local development.
judges would limit this political power (RAJAN and ZINGALES, 2003). Pagano and Volpin (2005)
socialist (BERKOWITZ, PISTOR and RICHARD, 2003b).
investors, through emphasis on religion and language. They found a robust correlation between the
enough factors to neutralize the effects of origins. Harris (2008) names this current
Goldschmidt and Schwartz (2007), based on the analysis of the relationship between culture and three types of
in relation to origins, even though they consider them variables that are difficult to distinguish. The importance of
about financial development, in which the State is an arena in which groups, friendly
transplanted common law and civil law systems , as well as their association with strategies
rekindle the discussion about the importance of British colonization and the English language as a
it would encourage legislative changes in the sense of reducing barriers. In this way, the authors
groups would also be tempered by the level of transactions with other countries. the right is
conjunction between the transplanted legal institutions and the receptivity of the legal system that
cultural values would have a greater explanatory capacity about the dominant individual values in
defense of interests of specific groups, such as entrepreneurs, in Calvinist doctrine
law, where legislation is an instrument in the hands of politicians. In the common law system, the
Stulz and Williamson (2003) examine culture and its impact on the right to
Political institutions, in turn, are also conceived by some studies as
mother during the formation of the country's legal system prior to the adoption of the
–,
Other studies highlight culture as the most relevant explanatory variable. licht,
creditors' rights, Protestantism and Catholicism, greater than that verified by LLSV
of Politics and Finance. Rajan and Zingales (2003) formulate a theory of interest groups
50
culture would be tempered, however, by the country's openness to international trade, which
or not to the rise of financial markets, fight for control. The relative power of these
governance norms – the rule of law, the level of corruption and democratic transparency
of colonization, which is carried out by Acemoglu, Johnson and Robinson (2001, 2002). Berkowitz, Pistor and
Richard (2003b), in turn, when analyzing transition economies66 , emphasize the
associated factors higher values in these three indicators. For these authors, the guidelines
speculate that culture and religion would be just a rationalization of political discourse, in
Machine Translated by Google formal law.
legal requirements of investors, majority judgment could be detrimental to investors when
legal. A politicized legislative process would have been responsible for voluntary choices and
initially drawn in relation to the high level of employment. This in turn would mark the
financial development. La Porta et al (2008), incidentally, admit that historical issues
In a similar vein, Roe (2003, 2007) argues that political economy
dominant political interests (ROE, 2000). More articulately, Roe (2006, 2007)
laws with rules from different legal traditions, later adapted to the needs of
recalls that Roman law, the basis of civil law, structured in the form of a flexible case law
secondary. For him, policies pursued by different governments, for example, the
financial markets, as well as the way in which these conflicts are resolved, are responsible for affecting
French civil law. In this process, Pargendler (2012b) emphasizes the importance of
demonstrate how the design of the democratic electoral system influences the rights
corporate characteristics that are specific to it, such as the concentration of ownership, as these mechanisms
Specifically in relation to Brazil, Pargendler (2012b) maintains that the construction of the
colonization and the conservation of expropriatory legal institutions, despite changes in the
homogeneous social rights on the part of political parties, is inclined to provide improvements in the protections
in its profit-maximizing behavior, which could jeopardize the policy
theory about the origins, even though it has carried out legal transplants from other systems
Other historical studies also reinforce the political economy view of the
development of financial markets in a particular sense, according to the
aware of the effects of legislators on the right to be adopted, which resulted in
these do not represent the interests of dominant social groups.
are the most challenging to origins theory. In this sense, Malmendier (2009)
generally surpasses institutions such as the legal tradition, which he considers an institution
notes that politics, conflicts between social groups and even between competitors in
local elites. This would distance Brazil from simplistic views of involuntary adoption of standards
– which calls into question the dichotomy of systems in theory about origins –, was able to shelter
51
the shape and effectiveness of financial markets.
political constitution of the country, with emphasis on the social inequalities originated from the strategy of
full employment in European social democracies, would be associated with governance arrangements
of investors. As proportional systems, by capturing the interests of groups
peculiarities are able, for example, to reduce the discretion of corporate managers
Commercial law since 1850 has observed a pattern completely different from the model envisaged by
Machine Translated by Google states that the initial conclusions of the literature on origins implied a very
(MALMENDIER, 2009).
motivation of groups that perceive reform proposals as improvements in the protection of their
of investors, as advocated by the Law and Finance literature. similar conclusion
financial institutions with sufficient liquidity, as, without reforms in their legal systems, they would be
by them in four, in each of these periods at least one civil law country grew more
corporate governance, suggest that contingency factors, such as military conflicts,
financial, then there is the emergence of lobbying from these organizations as a driving force for
legal rules from one system to another would not be a solution for most cases, as some
historical developments in the capital market in the United States, particularly among
origins in financial development.
2.2.2. Origins theory as predictive theory
a primitive legal-commercial institution, the societas publicanorum, only as long as there was
development, the competition of state laws in the United States led by the State of
Coffee (2000) notes that historical evidence suggests that developments in
of common law rules with more financial development, for example. Coffee (2001)
loss of this political support, this primitive form of “entrepreneurial society” disappeared
extralegal factors would have played a more important role than advances in legal protections
legal reforms are carried out, within a democratic context, in accordance with the
pessimistic regarding civil law countries that wanted to develop their markets
was achieved by Musacchio and Turner (2013), who, when examining the history of
interests. Therefore, groups benefiting from development emerge first
Milhaupt and Pistor (2008), in turn, observe that, from 1870 to 2000, a period divided
condemned to have a model of ownership concentration. Furthermore, transplantation of
faster than common law countries. Cheffins, Bank and Wells (2012), when analyzing the
political instability, inflation and disorder in the economy would have been more relevant than
change in formal law (COFFEE, 2000).
52
Bringing together explanations from the history and political economy of law change,
The second possible interpretation refers to the predictive capacity that associates the validity
1930 to 1970, note that, although this period was characterized by robust
political support during the Roman Republic. When Roman law became more sophisticated and there was
Delaware has eroded legal protections afforded to investors. The authors conclude that
Legal institutions tend to follow, not precede, financial development. To the
Machine Translated by Google in legislative responses, in addition to approaching another hallmark of civil law: growth of
restrict their economic performance. The examples of France and Belgium – countries of civilian
assistance. Fairfax (2009) highlights both the US government as the owner of 6% of
financial compensation to executives, as well as financial aid plans
debt structuring and mergers, such as the acquisition of Banco Bear Stearns by Banco JP
would be surmountable, although the exact factors necessary for this were not known (LA
billion in the banking system (US$125 billion just for the nine largest institutions
government for Chrysler's bankruptcy filing, with the aim of forcing its
mechanisms at their disposal and that laws enacted by common law countries tend to reflect
In order to test the theory of origins against its proposition that
in fact, he already owns 60% of Bank of America, as well as being the majority shareholder of Citigroup,
Fairfax (2009) states that the United States went in the opposite direction to what the
aspects of legal systems would be so linked to the essence of these systems that the transplant
analyzed the reaction of the United States to the financial turmoil of 2008.
their actions) (FAIRFAX, 2009). Davidoff & Zaring (2008) even state that these
the answer they formulated better. For the author, the American response to the crisis focused on
(2008) refuse to conclude that origins limit a country's capacity for change or that
companies in the financial and automotive sector, by, for example, limiting the payment of
Similar intervention also suffered the automotive sector, with another US$80 billion in
administrative power, with the American Treasury playing a leading role in structuring
government agencies to these same sectors. The US government injected more than US$200
General Motors, the largest of the companies, at the end of the 2008 crisis under pressure
law with well-developed economies – would indicate that the obstacles associated with the origins
Morgan. Although La Porta et al (2008) argue that each country has a mix of
PORTA ET AL., 1998).
financial institutions) and became the owner of shares in hundreds of banks – the government of that country,
acquisition by a foreign company, which actually occurred in 2010.
pro-market ideology, Fairfax (2009) notes that the new laws adopted a typical market bias.
53
as well as the insurance company AIG (an institution that received another US$173 billion, more than 8% of
theory about origins and suggests that other forces, social, political and economic explain
origins would be associated with different crisis response mechanisms, Fairfax (2009)
would entail high costs with dubious returns (PISTOR, 2009). On the other hand, La Porta et al.
several laws were enacted that articulated not only government intervention in
movements would represent the largest partial nationalization in the history of the United States.
Machine Translated by Google 67 Gadinis (2013) highlights that this movement was compensated with the increase in the power of the United States Congress. However, it highlights that the democratic responsiveness of the Treasury's administrative decisions poses the danger of greater influence from interest groups. Particularly this post-crisis movement of 2008 would therefore be opposite to that of the crisis that occurred in the early 2000s, with technology companies (“dot com” crisis), in which the scandals were followed by the strengthening of the model of regulatory agencies (GADINIS, 2013).
financial bailout67 .
For authors such as Fairfax (2009), common law countries increasingly depend
2.2.3. Theory about origins as normative theory
In this sense, they are evidence that the US trusts the market mechanism as
serious economic crises that require rapid responses. For others, however, like Pistor (2009),
explanatory and predictive theory about origins are valid, countries that aim
law: (i) acquisition of corporate shares without voting rights or with a commitment to abstain
mainly regarding commercial law, which is more uniform to account for more and more
social, political and economic stability, adopt legal institutions typical of common law.
civil law: increased the power of at least eight financial system regulators and
of rescues; (iii) use of financial devices to avoid the appearance of state control over
for financial development, which increases the relevance of transnational investments
about the origins, was mainly through research sponsored by
judicial decision-making by the US Treasury in the execution of its
regulatory; (v) difficulty in issuing laws and acts of administrative intervention in the economy.
common law and civil law (PISTOR, 2009).
However, the theory about origins maintains a certain relevance, according to Fairfax (2009).
The third interpretation emphasizes the normative bias: considering that the contents
of legislation to compensate for internal inconsistencies, even more so when faced with
organizing principle of economic activity, according to the model of commonwealth countries
financial development must, according to La Porta et al. (1998, 2008), in times of
the future points to a context in which talking about legal families will make less and less sense,
54
transnational transactions. Today globalization and internationalization are more important
governmental; (ii) absence of state guidelines regarding how resources are spent
Although the volume of academic citations largely reflects the relevance of this theory,
marginalized the role of the Courts and judicial rulemaking, through restricting review
and international corporate governance codes, which do not fit the distinction
Financial Institution; (iv) use of pro-market rhetoric when issuing new laws
Machine Translated by Google 68 Besley (2015) lists some of these studies, such as: Djankov et al. (2002); Djankov et al. (2003); Djankov et al. (2007); Djankov et al. (2008a); Djankov et al. (2008b).
GROUP, 2015). This dimension, accompanied by the credibility conferred by the Bank's seal
Asian, the International Monetary Fund (IMF) began promoting legal reforms
(PISTOR, 2002).
to reduce them, in 2002 it gave rise to the Doing Business Project. It is launched annually
because the quality of domestic rights in countries in that region was identified as
Finance Corporation), body to that subsidiary, sponsored comparative research in a way
Worldwide, with more than ten million annual accesses through the organization's website (DAVIS
contagion: countries with better quality formal laws and better enforcement would be more
associated with economic growth, as established by other surveys as well
The DB's influence is largely due to the grandeur of its scope: it brings together eleven
that normative influence has gained global strength (COLLISON ET AL., 2011;
investor protection (JOHNSON, BREACH and FRIEDMAN, 2000), which would be in line
constructed by these studies, as well as the main conclusions derived from them were
the performance of small and medium-sized companies in more than 189 economies (WORLD BANK
As a context, after the financial crisis of the late 1990s, which occurred in the East
was the harmonization of the different systems based on the development of legal standards
by De Soto (1989), who measured obstacles to entrepreneurs in Peru and suggested reforms
regarding corporate finance and corporate governance (PISTOR, 2002). this occurred
main publication, the Doing Business Report (DB), today the Bank Group's greatest success
Following a similar guideline, the World Bank, through the IFC (International
protagonist in inducing such turmoil in the markets, mainly in relation to the process of
and KRUSE, 2007; MICHAELS, 2009; BESLEY, 2015).
to identify the main obstacles to financial development (PISTOR, 2009), an element
55
promoted by World Bank economists, as in Levine (1997). The indicators
well prepared to deal with similar crises relative to countries offering weak
quantitative data sets, with historical series, about the regulations incident on
2011; CABRELLI and SIEMS, 2015).
used to categorize countries' legal systems (PISTOR, 2009). The sum of indicators and data compiled
by studies of the Law and Finance68 literature with the methodology
with the study by La Porta et al. (1998), contemporary to the crisis. The model proposed by the IMF
Machine Translated by Google 69
70
71 Michaels (2009) points out that one of the exponents of Law and Finance literature, Simeon Djankov, held the post of chief economist at the World Bank for years, leading the Doing Business Project. Djankov was also Chairman of the Board of the European Bank for Reconstruction and Development (EBRD) as well as Minister of Finance of Bulgaria (2009-2013). Incidentally, the presence of the main authors of this literature is noted in highly visible positions in the 1990s and 2000s. La Porta and Lopez-de-Silanes were advisors to the Financial System Commission in Mexico, while Lopez-de-Silanes held a similar in the IMF and the World Bank (COLLISON ET AL., 2011). As an example, Besley (2015) cites Narendra Modi, Indian Prime Minister, who expressly stipulated the goal of reaching 50th place in the DB, and Vladimir Putin, Russian President, who in 2012 promised to raise Russia to 12th place by 2018 . Fauvarque-Cosson and Kerhuel (2009) note that the initial conclusions of Doing Business were so contrary to countries with greater civil law influence that France, although it suggested abandoning the one size fitz it all concept, a claim later accepted by the Bank World, carried out legislative reforms, with the edition of the Loi de Sauvegarde des entreprises (loi nº 2005-845) and the Loi de modernization de l'économie (loi nº 2008-776). In addition, the French reaction also included its own program of analysis of the efficiency of French law, the Attractivité Economique du Droit, a movement in defense of French legal culture, led by the Association Henri Capitant, the launch of the Fondation pour le Droit Continental, in addition to of a series of publications and studies, from academia, the Judiciary and the French administrative courts, aiming to respond to what had been identified as global legal competition (FAUVARQUE-COSSON AND KERHUEL, 2009).
lent its reputation to these studies, origins theory has sought to revisit
However, the DB is based on the conclusions of the theory about the legal origins, serving
Mundial69 made this project a reference for academics, politicians and investors. Over the
published in renowned journals, which is mainly due to the prior lack of this
.
In this regard, Pistor (2009) maintains that the DB borrows a lot from La Porta et al. (2008)
subject, there were more than 5 thousand working papers published online and more than 2 thousand articles
of propaganda to this academic literature and creating a relationship of symbiosis: while the Bank
once adopted by renowned international organizations and incorporated into the DB, the arguments and
assimilation, which facilitates its political use and is reinforced by structuring all countries in
prescriptions arising from certain conclusions obtained in research in the Law and Finance line start to be
directed to investors and legislators70 in a normative manner, in favor of the adoption of institutions typical of
the common law71
56
rankings, and, moreover, it is an English language publication.
This relationship is worrying, because if, on the one hand, in academia, the theory about the origins
international (AHLERING and DEAKING, 2007; FAUVARQUE-COSSON and KERHUEL,
2009). For Davis and Kruse (2007), the DB was successful because the clarity of the numbers is easy to
laws is interpreted in a descriptive and analytical way, subject to wide debate, on the other hand, a
type of data compilation (BESLEY, 2015). In addition, the DB serves as a model for
World Cup during the last decade financed the expensive surveys of researchers in the area and
legislative reforms, investment decisions and methods of analysis of financial institutions
scientificity the assumptions that underlie the DB (PISTOR, 2009; MICHAELS, 2009a).
who, while recognizing the limitations of possible transplants between systems of origins
Machine Translated by Google legal transplants accompanied by the absence of traces of familiarity awakens resistance
Djankov et al. (2002) do not identify the reasons that would justify the low costs of changes
desire all economic outcomes titled by the Law and Finance literature as
protectionism against foreign legal transplants. Furthermore, although it is easy to change
interdependence and self-referencing of rules (in the sense that only some rules are
notes that the foundation would be a mere presumption that all legal systems
this may not be universally valid. Michaels (2009) maintains that the theory about origins
It is no coincidence that the export of standards must always take into account the context
implicit and explicit references to others), legal terms or concepts with meanings
rent-seeking (gaining economic income derived from manipulating standards).
and that they are diverse from each culture.
economic (DEAKIN and SIEMS, 2010). Pistor (2002) highlights that it does not matter the quality of
different, claim that it is possible to change some legal rules without incurring great costs and
may reflect more diffuse values in society, such as the preference for avoiding harm
recommendations for legislative reforms. It can be an element that requires adaptations
citizens themselves – will always be the determining part of the meaning of the norm. the export of
of new companies in the market (regulation of entry). However, La Porta et al. (2008) and
highlights the normative bias of origins theory and its assumption that people
also represent a factor of restriction to advances, of conservatism, or even of mere
domestic, with the problems of different interpretation from each culture, the
of these institutions nor the certainty of benefits that would accompany them. Pistor (2009)
formal law, the values that inform legal norms are not.
“good” ones, for example, a larger financial market or a faster judicial system. But
understood completely without necessarily requiring deeper explanations about
function in the same way given the supposed decrease in behavioral incentives
particular to the place where they will be applied, such as historical, social, cultural and
connects the right to economic progress, neglecting that there are intrinsic values to things
57
In fact, observes Michaels (2009), culture has a dubious character when it comes to
This assumption, according to Pistor (2009), would neglect the fact that such barriers
laws offered: the demand side – represented by legislators, legal operators and
with certain returns in terms of economic efficiency, such as lowering barriers to entry
regulations and, therefore, the effectiveness of changes in law is fundamental. However, you can
subsequent barriers through ex ante barriers instead of resorting to ex post regulations. this illustration
Machine Translated by Google neutrality, universality and rigor (KREVER, 2013). It is highlighted which numbers would give the false
economic progress, given the possibility that gaps will be filled by substitutes
only that different adaptive strategies can be outlined for countries and sectors in
(PISTOR, 2002), which, for Krever (2013), occurs in DB, through the choice of indicators
DB, by seeing law as mere technology, reifies neoliberal institutions and reduces the
application costs than new formal legal norms applicable to the activity
The normative bias of the theory on origins reflected in the DB's conclusions also
development. This is because the incentives for legal changes reserve a secondary role
of information and the transmission of political guidelines, best code guidelines
that of the United States (DEAKIN and SIEMS, 2010). How commercial and financial transactions
to business and private contracts (KREVER, 2013).
different. Therefore, the new law needs to count on the interest and understanding of those who
capacity to increase the credibility of its political commitments. It is noted,
in a scenario in which there is no supranational authority with enforcement capacity,
discourse in politics, as numbers would have the virtue of appearing more objective,
More than that, the transplantation of formal legal institutions is not necessary to
that such functional equivalents can replace it adequately and completely, but as
Choosing a model that serves as a parameter has traces of legal dominance or imperialism
technical impression, which would sterilize the political decision-making process. O
functional. Milhautp and Pistor (2008) point out that some mechanisms sometimes offer less
of the quality of law that disseminate an “embedded” neoliberal ideology about whatever is
particular (COFFEE, 2001).
diversity of potentially contesting discourses of the development model
economic, such as: pacts between political leaders and political groups that facilitate the dissemination
to law, as a facilitator of the functioning of the market mechanism and as a platform
hides a benchmark: an economic development model close to that which is
58
transactions require a coordinated response from multiple jurisdictions, states Pistor (2002) who
practices that disseminate signals of desired behavior in the market, political leaders with
The quantitative character of the DB72 studies would have facilitated the entry of this type of
they want to make use of it to bring about effective social and legal change (PISTOR, 2002).
The construction of effective domestic institutions becomes essential. However, the process of
However, these alternatives do not mean reducing the importance of positive or
For a discussion of the use of quantitative methods, see Section 2.2.1. 72
Machine Translated by Google economies that normally depend on the resources of this banking entity (DEAKIN and
more considered conclusions regarding the validity of information for use in reforms
constitute an indirect governance mechanism. Creating a quality ranking
(KREVER, 2013). This would be convenient for the World Bank, since this organization
“technical” aspect, it becomes easier to pass on the idea that reform is needed or
scope of the World Bank to evaluate the study methodology, with special attention to the
labor market regulation (BESLEY, 2015). And, in fact, the 2015 edition of the study presents a
new methodological design73 , with changes in eight sets of indicators, to be
provides supposedly legal-technical assistance and, when the law is reduced to a
absolute rule of law in relation to a given function of norms puts pressure on countries to
2009a; PISTOR, 2009).
emphasize regulatory competition, through rankings and ready-made recommendations, which
Because of criticism like these, an independent panel was formed in 2012 at the
59
cease to be mere listings and take on the role of formulators of public opinion and
interconnected and multifunctional, in addition to relating to other aggregates of
(FABIANI, 2011).
be understood before being appropriately applied, under penalty of erosion of its effectiveness. legislative74 . This is in line with Pistor, Raiser and Gelfer (2000), for whom the law needs
Michaels (2009a) argues that DB also stifles potential political discussions by
formal and informal regulations, through their relative costs, for example (MICHAELS,
an assistance (TRUBEK AND GALANTER, 1974; MIHAUPT AND PISTOR, 2008). Indeed,
carry out reforms aimed at improving these same functions, many of which are even
political interference is prohibited, according to its own Constitutive Agreement
SIEMS, 2010). However, this conception of law ignores that legal institutions are
fully implemented only in 2016. Furthermore, the most recent versions of the study contain
According to the publication, the amendment has two objectives: to expand the scope of both the efficiency measure of a transaction or services to include aspects of service quality and the regulatory quality measure to include good practices in the surveyed sectors (WORLD BANK GROUP, 2015, pp. 24). Even so, the DB insists on highlighting the more than 600 legislative reforms that it would have given rise to since 2003 (WORLD BANK GROUP, 2015, pp.22, 33-45, 152-166).
73
74
Machine Translated by Google ended, what they call “Moments”. The first of these would have occurred in the 1990s.
fixed infrastructure and prior to finance, what Pistor (2009) calls “endowment model”. A
approaches – namely, respectively, Trubek and Santos (2006), Castro (2009) and Pistor (2013b).
causality between one and the other, but only imbued with the intention of understanding the interactions
about the conceptualization of development and the paths that would lead to it.
functional complexity of legal norms. For this reason, this third section focuses on
The New Law and Development (NDD) is identified by Trubek and Santos (2006)
support the non-existence of a circumscription of the exact content, describes the NDD as a
development agencies of developed countries, such as the United States, and targeted
strictly positivist law and open to a more holistic view of institutions
these authors less as a complete and robust theory, and more as the intersection of ideas
The conceptualization of this field also changes in historical perspective, according to
- ALTERNATIVE THEORETICAL APPROACHES
New Law and Development (NDD), the Legal Analysis of Economic Policy (AJPE),
development agencies. Trubek and Santos (2006) observe that the NDD would end a
Since World War II, the D&D doctrine has presented points of relative cohesion of ideas that
financial development and economic growth, reduces its role to that of a
chronological publication of the works identified as the main ones in each of these
by development, regardless of its definition and without the intention of inferring
1960, when what they call the “First Moment” emerged and there were not so many doubts
emphasis on statistical methods seems to have overshadowed the role of the jurist in analyzing the
between them. This diversity of ideas is also expanded by Prado (2010), who, despite
3.1. New Law and Development
At that time, legal assistance programs were promoted by foundations and
alternative approaches that place the jurist in a more central role, escape the perception
field of studies, with a variety of approaches, analyzes and topics.
as the Third Moment of the Theory of Law and Development (D&D), characterized by
60
belonging to the spheres of economic theory, law and practical policies adopted by
legal entities and their interaction with financial development. Among them were identified the
the type of interaction between law and development. Trubek and Santos (2006) maintain that the
The dominant theoretical framework, although it considers the relevance of law for the
bundle of ideas that attempts to guide and explain changes in legal systems carried out in the search
as well as the Legal Theory of Finance (TJF). The order of analysis follows the criteria
Machine Translated by Google 75
77
76
75
Brazil received one of these projects, which gave rise to the Center for Studies and Research in the Teaching of Law (CEPED), the result of a partnership between the Getulio Vargas Foundation (FGV), the United States Agency for International Development (USAID) and the Ford Foundation . CEPED trained 228 lawyers in its five years of existence (1967-1972), with innovation in legal education through an interdisciplinary curriculum, with teachers such as Mário Henrique Simonsen, and emphasis on the consequences of law for the economy and business (TRUBEK , 2007).
Trubek and Galanter (1974) define “paradigm of liberal legalism” as a set of premises about the interaction of law and society, among them: (i) centrality of the state in controlling and promoting social changes; (ii) legal norms as instruments of social transformation; (iii) presumption that there is equivalence between legal changes and changes in social behavior; (iv) presumption that legal professions always defend the public interest; (v) presumption of institutional convergence of the legal systems of less developed countries towards institutions from more developed countries. According to Davis and Trebilcock (2001), this is the view of development as the adoption of a pre-established model of society, which is later characterized as the theory of modernization. According to this approach, development implies institutional convergence of less developed countries with standards from Western developed countries, which can be summarized with the adoption of the rule of law through legal transplants.
necessary and sustainable. Trubek (2001) also observes that elites from these less
as a framework for the operation of government bureaucracy.
1950s and 1960s, defended the prominence of the State's managerial role in the economy, in the
to countries in Africa and Latin America. These programs were designed by the academy
legal system of that country – what Trubek and Galanter (1974) identify as the “legalistic paradigm
reason, the First Moment of the D&D doctrine can also be understood, according to Trubek and
Santos (2006), for “Law and Developmental State”, marked by the treatment
American legal system with the implicit theoretical assumption that the export of the model
sense of promoting the transformation of traditional societies towards their “modernization”.
in key sectors and control financial capital, and thus promote industrialization by
United States (TRUBEK AND SANTOS, 2006)77 .
through import substitution strategies (TRUBEK and SANTOS, 2006). For this
61
Furthermore, Trubek (2001, 2012) highlights the predominance of theories that, in the decades
capacity and interest on the part of dominant private groups, the State should be able to
– less developed societies would be sufficiently capable of promoting social progress76
(TRUBEK AND GALANTER, 1974). Therefore, the initial emphasis of D&D was
coming from the American academy itself regarding the legitimacy and scientificity of The outcome of the First Moment of the doctrine was due to questions
on legal education, with professional training of operators from these countries in
plan and reallocate surplus capital, combat resistance from dominant groups, invest
There was a notion that the private sector would be insufficient to provide investments
developed would also be refractory to social changes. To remedy the absence of
liberal"
political instrument of law as a way of channeling economic and
Machine Translated by Google of property rights, which is partly explained by the influence of institutional economics
development began to be eroded by the failure of legal reforms promoted until
legal institutions do not play an autonomous role in development, as they would have their
of development, by assuming that the role of law would only be to provide the
building formal and informal institutions that create incentives for rational actors to
began to be questioned. In this way, critics and scholars in the field began to realize
argues that such conclusions about the role of law have attracted little attention from
thus from a protagonist state, with emphasis on administrative law, to the emphasis on
protect property rights and reduce transaction costs to promote credibility in the
law and economic development, but the movement also had a bias
Indeed, from the 1970s onwards, mainstream thinking about
form, what Trubek and Santos (2006) identify as the “Second Moment”
assistance programs, as well as because of the scarcity of resources previously injected by
criticism actually resulted in the death of the academic project, which converged with the loss
World, began to focus on pro-market reforms, which were later covered by the label
From the mid-1990s, the Segundo Momento began to place greater emphasis on defense
Krever (2013) narrate that the notion of importance of legal institutions for the
Davis and Trebilcock (2001) observe that this First Moment left the lesson that
The rise of neoliberal thought reserved a secondary position for the State in promoting
by Douglas North. For him, the development of a modern economy is linked to the
then. Furthermore, the application of this exported model to American society itself
legal foundations to promote the expansion and efficiency of markets. there was the migration
effectiveness linked to a wide range of other institutions. Still, Krever (2013)
engage in economic transactions. These institutions would aim, for example, to
that not only had very simplistic assumptions been adopted about the relationship between
private law and legal changes that would facilitate the integration of markets. Of that
and development entities, such as the World Bank.
enforcement of contracts. According to this theory, it is precisely the lack of these institutions in
62
economic development, supported by the Bank's financial and intellectual resources
ethnocentric (TRUBEK, 2001). Despite the call for in-depth empirical studies, the
of the D&D doctrine, by them also called “the Law and the Neoliberal Market”.
development agencies and foundations. On the part of academia, Trubek and Galanter (1974) and
“structural adjustment” (KREVER, 2013). In this context, according to Trubek and Santos (2006), the
of interest to development agencies (TRUBEK AND GALANTER, 1974).
Machine Translated by Google 78
79
See note 73 79 According to Davis and Trebilcock (2001), the view of development as aggregate economic growth welcomes scholars from three main groups: (i) those highlight the role of the State in solving market failures (developmental); (ii) those who defend the reduction of the state's role and the consequent increase in the importance of the market mechanism as an organizer of economic life (neoliberals); and (iii) those who understand that the State and institutions related to it have a fundamental role in the construction of institutions critical to economic development (institutionalists).
same, with reinforcement of property rights, legal security and the independence of the
from the female gender to politics, the promotion of gender equality and social empowerment
only from the perspective of modernization or economic growth
At the same time, in the 1990s, a deeper debate about
gender inequalities (DAVIS and TREBILCOCK, 2001). Humanism, which gained strength
Even so, in the Second Moment, ethnocentrism persisted, the emphasis on the
development. Davis and Trebilcock (2001) associate the origin of the expansion of the concept of
(GDP), would not be able to capture certain inequalities, for example those related to
means of developing markets and society (TRUBEK and SANTOS, 2006). A vision
less developed countries that explains their level of development. (TRUBEK, 2012).
rejected the notion that different countries should experiment with similar forms of
sustainability, in turn, emphasizes the link between environmental quality and development,
development would only consolidate after 2000.
emphasized the role of law also as a constitutive element of development itself
from D&D. On the other hand, feminism, one of the new conceptions, defends the need for greater access
competition of concepts, the path to development is no longer seen as
(DAVIS and
Judiciary.
TREBILCOCK, 2001).
of women, so strictly economic concerns should be open to combat
legal reforms with the emergence of other perspectives on the definition of
technical support of legal reform programs, as well as the belief in legal transplants as a
with the ideas of Sen (1999), maintains that economic measures, such as the Gross Domestic Product 63
minorities and gender (DAVIS and TREBILCOCK, 2001). The development perspective
development to the emergence of dependency theorists, who in the 1960s and 1970s
broader view of Law and Development Theory that welcomes these other perspectives of
Therefore, the “Second Generation of Reforms”, as called by Davis and Trebilcock (2001),
emphasizing the search for the well-being of both current and future generations. Due to this
development. This is opposed to the theory of modernization78 , which inspired the First Moment
Machine Translated by Google more qualified belief as to the need for adequate regulation. The role of law
this perception, one of which refers precisely to the rise of holistic thinking
in a broader way they do so in order to include law as development itself
such diverse conceptions would represent a potential for conflicts within the field itself.
social objectives, such as poverty reduction. In this sense, the current orientation points to the
of the doctrine, NDD, conceives development as consisting of several dimensions, social,
been influenced by Amartya Sen's conception of development as freedom.
Trubek and Santos (2006) argue that a second brand of this new Moment should be
of the Judiciary (TRUBEK and SANTOS, 2006).
However, this holistic approach as one of the NDD consensuses is not exhaustive
From the diversity of development conceptions, Trubek and Santos (2006)
Economists today would be aware of the need to reduce transaction costs and
After the financial crises of the late 1990s and the beginning of the new millennium,
that assume development as economic growth as a premise, which makes it
(2011) believes that this same diversity, combined with the variation in conceptions about the relationship
point out, however, that this is not a question of total disbelief in the efficiency of markets, but rather
doctrine of Law and Development, a Third Moment. Three points would justify
of “right in development” (PRADO, 2011). Those who conceive development
of the field of New Law and Development. In the same sense, the reception of
also goes beyond the defense of property rights to include human and other rights
of development, in order to include other areas besides the economic one. the new moment
(PRADO, 2011).
– what Prado (2011) identifies as “law as development”. This group would
reduction of formalist legal thinking and increase of consequentialist thinking
political, cultural, with interdependencies between them (SANTOS and TRUBEK, 2006).
refers to the consensus on the need for state regulation of the economy, as most
view of law as both a means and an end in itself (PRADO, 2011).
64
highlight the growth of diversity sheltered by the Law and Development seal. Meadow
according to Prado (2011). For her, the Law and Development seal also covers studies
correction of market failures, such as information asymmetries. Trubek and Santos (2006)
Trubek and Santos (2006) defend the existence of a new consensus among scholars of
between law and development would be responsible for making it difficult to conceptualize precisely and
see law as a mere instrument in promoting development – what she calls
Machine Translated by Google Development is marked by the conception that such institutions are so interventionist
need to reduce the state's role in the judicial enforcement of contracts and the protection of
pre-existing institutional framework of each country. As a result of forming this perception, Trubek
about human behavior, such as culture, would be more refractory to the law's ability to
would play an important role in the distribution of economic resources and power in society
advocate greater regulation and direct state participation in the economy, with the aim of
as a certain self-criticism on the part of scholars.
Trubek and Santos (2006) finally highlight a particularity of the New Law and
A third consensual point of the NDD, according to Trubek and Santos (2006), is related to
diversity of methodological assumptions. According to her, these variations translate, in turn,
consolidated by developmental thinking itself. Among these questions,
Prado (2011), however, when emphasizing that Law and Development also welcomes
transfer of foreign legal institutions to developing countries. You
For example, the adoption of individual rationality, typical of neoclassical economic studies,
contracts and property and court decisions. For these authors, the New Law and
includes both supporters and opponents of state regulation. While these support the
shared view that the effectiveness of legal reforms depends on the
however, by taking as assumptions more structural views about the forces acting
in the economy as well as regulatory public law, as private legal institutions
property rights, for the best functioning of the market mechanism, those
of promoting social changes by itself (PRADO, 2011).
and Santos (2006) maintain that there has been a complete abandonment of the one size fits all notion, as well as
(TRUBEK and SANTOS, 2006).
implement public policies (PRADO, 2011).
Development: your critical sense, in the sense of being responsible for questioning assumptions
However, Prado (2011) points out that the Law and Development seal also includes
65
time, in different conclusions about the power of law to condition social behavior.
with the emphasis on local institutions allied to the perception about the limits of simple
lies the fight against the supposed neutrality of private law, of legal rules on
studies that deal with development as economic growth, maintains that this seal
would lead to the conclusion that law is capable of changing social behavior. Others,
failures of legal transplants performed in transitional economies gave rise to the
Machine Translated by Google all, the GPC also rules out the possibility of full adoption of pre-established regulatory models
Castro (2014) identifies the production of this approach as Public Capital Management
assuming that the law only serves as an instrument to protect the rights of
public banks allows not only correction of market failures, but also regulation
CASTRO, 2014). At this point, by advocating a nationally adequate path to
economic growth, but also the definition of development in a more
broader social conflicts, far from a politically neutral conception.
organization of the markets themselves). Thus, public banks can play a leading role in
regulatory frameworks for finance, as well as as a component of economic development
center occupied by the social and economic consequences of financial flows, in the sense
cost, reducing, in the sense of Fabiani (2011), the obstacles to the development of
Having traced the broad theoretical gradient sheltered by the New Law and Development seal,
Brazilian credit, from 1999 to 2006: the endowment model, according to which the right is a variable
implicitly considers in its argument the role of restricted credit volume and spread
In line with the D&D doctrine's rejection of the export of one size fits models
monograph, financial development.
suffer reciprocal market influence. By highlighting that the credit market has been reformed
valued. Schapiro (2010) argues that, in the national context, state activism through
conceived of the financial system from more developed countries (SCHAPIRO, 2010;
(GPC). This perspective not only embraces the vision of development in a way linked
financial system through the establishment of governance structures (creation and
creditors, Fabiani (2011) implicitly highlights other functions of law, as a mediator of
wide. In this way, law is seen both as an instrument, a means to achieve ends
concession of subsidized lines of credit in sectors where there is high private credit offer
The GPC is also characterized by two other aspects. The first refers to the role
66
whether or not to promote freedom and development. Castro (2014) suggests that Fabiani (2011)
(CASTRO, 2014). Fabiani (2011), for example, highlights the prevalence of a specific view of law in
official documents that suggested legislative changes80 in the market
aspirations of groups and individuals.
We move on to the analysis of theoretical discourses that specifically deal with the scope of this
high banking: they are obstacles to individuals and groups in achieving their objectives
exogenous to the economy, as a prior and fixed instrumental infrastructure, with no possibility of
80
February 2005. Fabiani (2011) points out that one of these suggestions resulted in the new Bankruptcy Law, Law No.
Machine Translated by Google corporate strategies focused on product and process innovations” – as well as
institutional alternatives. Therefore, it is based on the point of view of Bebchuk and Roe (2004),
based on knowledge (SCHAPIRO, 2009). This new reality, in turn, proposes new
development, the NDD would represent a refusal to accept recommendations
Finance presupposes a certain convergence of corporate financing models to the model
economy, which shapes the functioning of their respective financial systems.
Specifically, Schapiro (2009) examines the hypothesis of public banks, such as Banco
based on liberal growth models. According to Schapiro (2009), the Law and
challenges to be equated by law, to the extent that it not only requires a new
However, Schapiro (2009) starts from the premise that the alternatives to be offered
in a context different from that in which the development of the richest countries took place. While
these developed during the validity of the Fordist81 paradigm of industrial organization, the
privatization of several state public banks in the 1990s, the BNDES still
by law are linked to the legal-institutional trajectory of each regime
67
current economic context presents itself as an overcoming of this model, an economy
investments and absence of guarantees usually used in financial operations
deficiencies and the alternatives, as mistakes” (SCHAPIRO, 2009, pp.306).
public, the resistance of groups benefited by this same arrangement, such as for whom once a certain arrangement has been established, such as the financing model
means of preserving the established regime. This would explain, for example, the fact that, despite the
Instead, Schapiro (2010) argues that less developed countries are
(SCHAPIRO, 2009, pp.160).
maintain as a growing public financing agent (SCHAPIRO, 2009).
Anglo-American, characterized by an emphasis on private economic transactions. The utilization
corporate design – of “emerging companies, carriers of intangible assets and
of this parameter implies “the identification of institutional differences between countries as
involves new business characteristics – high risk, long maturity of
National Development Bank (BNDES) constitute one of these
81 Schapiro (2009, pp; 106) defines Fordism as the expression used to describe an industrial production organization model – a techno-productive paradigm – with the following characteristics: (i) a determined productive technique, constituted by the rationalization of production through segmentation the production process; (ii) a specific type of work relationship, based on the division of functions, without requiring multiple skills from the employee; (iii) an efficiency model, based on specific scale-up tasks; (iv) a characteristic manufacturing product, that is, standardized final products, in series; and (v) a spectrum of consumption, mass consumption.
Machine Translated by Google of institutions (SCHAPIRO, 2009).
While they are attached to a certain set of institutions, such as the stock market,
For this reason, even though there is abundant literature that argues the virtues of
American, Schapiro (2009) argues that such a solution belongs to a context
Schapiro (2009) cites as a source Charles Sabel, an economic historian, who argues that
high risk financed through the capital market, as in the model
dispersed capitals, and associates them with higher levels of development, those make
that lead to a minimum level of national development are conditions rather than
In contrast, Schapiro (2009) cites Magabeira Unger (2004), for whom this
result of adherence to international regulatory standards (SCHAPIRO, 2010). On the same line, 68
The unfeasibility of replicating institutional arrangements pits experimentalists against fetishists.
institutional framework appropriate to local needs. This is the guide suggested by
thriving capital market, with anonymous and dispersed investors, is not found in the
Brazil. Therefore, the use of similar institutional solutions, such as investments in venture capital82 ,
would be impossible to replicate83 (SCHAPIRO, 2009).
economists, such as Dani Rodrik, for whom specific organizational adaptation strategies
circumscribed, a legal-institutional arrangement, not always found in other locations.
use of law as an “instrument of institutional imagination” and open up to new combinations
Specifically, the author argues that the context of the United States, characterized by a
Schapiro (2009, 2010) thus preaches the need to manufacture an arrangement
82
83 Research carried out on the websites of the Chamber of Deputies and the Federal Senate on November 8, 2015, reveals that the only proposition to be processed in the National Congress on venture capital is the Complementary Law Project nº 446 of 2014, which, according to its summary, establishes incentives, including through the improvement of the business environment in the country, for investments made in business participation through venture capital. This is the result of a study carried out by the technicaladvisory body of the Chamber of Deputies, the Center for the Study of Strategic Debates (Cedes). The study deals with private equity and venture capital, or even venture capital or entrepreneurial capital, a form of investment whose objective is “to enable or accelerate the development of companies – often privately held and with high growth potential – through the effective involvement of a professional manager in the business”. On the occasion of its official presentation by Rep. Inocêncio Oliveira, then President of Cedes, a publication entitled “Capital Empreendedor” was launched, which in addition to conveying the text of the proposal of PLP 446/2014, exposes the results of the study. Among them, mention is made of “the identification of shortcomings in our legislation”, such as “insufficient legal protection for investors who direct their resources to temporary participation in privately held companies”. To illustrate, PLP 446/2014 proposes, as one of the solutions to the “deficiencies” identified, the improvement of the disregard of legal personality, in order to avoid that “investors are legally liable for amounts that significantly exceed the capital they invested” (CHAMBER OF DEPUTIES, 2014).
Schapiro (2009, pp. 197) defines venture capital as an investment tool in emerging companies, according to which the capital contribution occurs through concentrated equity participation, in charge of specialized investors, who have mechanisms to actively monitor the management of the invested company. Through this mechanism, the aim is to reduce the risks resulting from the asymmetry of information between entrepreneurs and investors, as well as any lack of managerial knowledge in new companies.
Machine Translated by Google thus, have access to a court of justice. Likewise, abstraction puts a veil over the different
to compensate for the gaps present in the structure of the domestic market compared to the
analytical tool for examining the legal consequences of decisions taken within the scope
include vectors equally pursued by law, such as “good” and “justice”. AJPE aims
include differences between participants, rules, and influences from informal institutions such as
alternative access to credit. This is a recommendation that is the opposite of what the Law literature preaches.
apprehension of the legal system and the legal formatting of policies. Part of the perception that
One of the cardinal assumptions of this approach is the denial of markets as mere
per capita and less developed financial systems (LA PORTA, LOPEZ-DE-SILANES,
they present flaws regarding the equitable enjoyment of fundamental rights (CASTRO, 2009).
of utility. These market agents carry out transactions based on information
essential to development is the ability to experiment with arrangements, a process capable of
largest capital market (LA PORTA et al, 1998, 1999; KLAPPER and LOVE, 2004).
which the current legal culture provides incapable resolution techniques, according to Castro
neoclassical approach to develop analysis of institutions based on their moral consequences and,
Thus, as an institutional alternative, Schapiro (2009) advocates greater state action
The Legal Analysis of Economic Policy (AJPE) is born as an alternative to
translated into terms of efficiency and, on the other hand, non-economic interests and values, which
empirical designs of market economies, making it difficult to examine their compositions that
from more developed countries, which could occur through public banks, as a way
fill this analytical gap of the legal operator.
of public policies in their economic aspect, as opposed to formalistic methods of
religious customs, moral codes, bureaucracies, etc. (CASTRO, 2010).
and Finance, which links state ownership in the banking system to lower income levels
abstractions, which embody the ideal of perfect competition between maximizing rational actors
market economies, while allowing innovation and general wealth to flourish,
69
This contradiction, when opposed to legal operators, puts them in a decision-making dilemma, to
SHLEIFER, 2002), or even reinforcement of investor protection, as a way of achieving
transmitted at freely agreed prices. Such an abstract conception prevents the economy from
give rise to solutions suited to the particularities of each country.
(2009), of reconciling, on the one hand, consequentialist concerns of an economic nature
3.2. Legal Analysis of Economic Policy
Machine Translated by Google of their conceptions of what their rights are or should be (CASTRO, 2005, 2009, 2014).
producers, traders or consumers of goods, services and other utilities of value
services and which consist of consumption practices that can acquire meaning not
legitimate to make the exchanges. On the other hand, AJPE allows the identification of changes
monetary and exchange rate measures
This approach also offers new legal categories for understanding the
economic, social and cultural” (DESCs) (CASTRO, 2009, 2014).
transmissions of these monetary values through intercontractual chains
different regulations, which occur, in turn, through due process of law, as in
identified from the fundamental rights that not only entitle, but mainly
practical consequences. On the one hand, it allows the lawyer to focus his analysis on the processes of
In this sense, economic policy is also understood in a peculiar way by AJPE:
–,
The AJPE, on the other hand, asserts the empirical existence of markets, which are
trade are identified as production rights, always understood as a way
rules originating from institutions outside the market, such as States, courts and associations
differentiated the current and planned actions of individuals and groups, with reflections on the formation
that articulate patterns of cooperation between individuals and between these and groups, be they
refer to activities in which there is no intention of producing or commercially exchanging products and
can determine what can be exchanged and also the procedures considered valid and
According to Castro (2007), part of economic policy – understood, in economic discourse, as
economic, both locally, regionally or even globally (CASTRO, 2009).
of the original conditions of the contracts, through changes in relative prices, and possible
economic (cultural, moral, religious, etc.), which can be classified as “rights
is carried out through financial contracts submitted to
economic dynamics. Market agents are understood as economic actors
(CASTRO, 2007).
This notion of the economy as a fabric of empirical relationships presents two
issue of new laws that determine mandatory content clauses (legislative process) and
70
construction of these connections on an essentially contractual basis, as well as in the different types of
they take place empirically. Thus, legal activities of economic production and related to the exchange
it is a set of rules and principles issued by the State that affect in a
structured as sets of social practices and intertwined empirical normative links,
professionals, for example. Castro (2007) exemplifies that the rules that structure markets
“commercial property” (CASTRO, 2014). They are opposed to consumer rights, which
Machine Translated by Google 2007, 2014).
can be grouped by Castro (2005) into four categories of instruments. A
of the State in open markets for purchase and sale of financial securities, as well as
they can be discussed with relative breadth in the legislative and judicial spheres, for example. O
ignored by the strictly economic discourse, the AJPE starts from two assumptions. The first
administrative, in the production – or delegation of this production – of utilities for social consumption,
All these instruments are capable of altering the conditions in which individuals and
transaction with public debt securities. This unevenness can result in policy decisions
such as Economics, Economic Anthropology and Political Science, AJPE can broaden the views
(i) rules on individuals and groups authorized to carry out certain activities
– thus influencing the perception of what subjective rights are (CASTRO, 2005).
unavailability by law based on the symbolic, cultural and affective value they represent
in court decisions declaring the nullity or the obligation of certain contents
contents of obligatory observance in private contracts, such as salary requirements
public institutions, with broad visibility and representation of the plural interests of the
suitable for the enjoyment of their own rights of production and trade (CASTRO, 2005,
The ways in which the State conforms this set of rules that constitutes politics
appropriating private wealth through the collection of taxes. The last one refers to participation
autonomy of individuals. Direct interventions, such as administrative concession contracts,
However, in order to assess the non-priceable and potentially
The first of these is the direct interaction of the State with private groups, through its
The same does not occur in the definition of the basic interest rate of the economy determined through the
in exchange markets, in the purchase and sale of foreign currencies (CASTRO, 2005).
is the interdisciplinary openness. Through the dialogue of Law with other intellectual disciplines,
as public services. The second includes direct regulation of the economy through editing
economy that fail to provide legal protection not only for certain assets covered by
groups form their preferences regarding the production and consumption of goods and other utilities
on the dimensions of the impact of the economy on empirical social life. This allows a
71
These tools, however, are not subject to the same level of deliberation in spaces
economic restrictions or even prohibitions on the exercise of these same activities, as well as (ii)
for their holders and that are not priced by economic management, as well as protection
contractual.
society, a deliberation capable of legitimizing state decisions through consensus
minimum in employment contracts. The third corresponds to the state's coercive power to
Machine Translated by Google related issues, such as the right to work. In the third, these rights are broken down into standards of
The second strategy is the rejection of metaphysical and formalist conceptions about the
the set of public and private contractual ties that also constitute the economy, the
institutional – conceived by the jurist as contractual aggregates
as a basis for legal texts or even surveys with the holders of these same rights regarding that
human being, which draws attention to the notion of the social construction of law. On the other hand, move away from
this perspective allows for more than one alternative to the formal treatment of the legal system:
institutional and social actions where the enjoyment of a right, be it production or consumption,
as well as the formulation
(CASTRO, 2014).
society, individuals and groups, whose practices allow, or not, the enjoyment of the rights
This Analysis is carried out through predetermined steps, which can be summarized in
the performance elements of the enjoyment of analytically decomposed rights can be seen in numbers.
more holistic understanding of non-economic aspects that so influence preferences
empirically by its titular subject. However, this is not a theoretical approach.
For this, AJPE makes use of complementary analytical strategies as a means of
a credit policy. In the second, the analyzed object is linked to subjective rights
economical.
combined, define the enjoyment of the right itself. Seen in another way, this beam is precisely
level of empirical fruition of a given right based on the analysis of social conduct standards and
institutional conduct necessary for the enjoyment of the right analyzed, an exercise that can take
own right. On the one hand, the jusnaturalist premise of rights inherent to the human being is denied.
of a fair fruition parameter. In the words of Castro (2014), position is “the intersection of
what Castro (2007, 2009, 2014) calls “programs or contractual aggregates”. The utilization
which they consider essential for the empirical enjoyment of the law examined. In the fourth, translate
formalism of legal positivism, which suppresses references to substantive legal content
acquires existence”.
envisions the law by considering the views of other members of the
–,
72
subjective.
AJPE, instead, understands the law from the lived social experience
six. In the first, an economic policy or a component thereof is identified, such as
In the fifth, the verified values are aggregated to result in a single index, the Index
and the social experience of the right by its holders when they are influenced by policies
access this information. The first one is the “Positional Analysis”, which tries to identify the
centered on the subject of law, but rather on the bundle of social relations and institutional practices that,
Machine Translated by Google 2nd stage Subjective Law Y
Conduct
Standard
6th stage
10
Source: Own elaboration.
20
5th stage
Conduct
Public Policy X
Fruition
Institutional C
Empirical
Conduct
Legal Validation Index of
1st Stage
Institution B
Figure 3 - Graphical overview of the Positional Analysis
4th Stage
Institutional A
10
3rd Sta
ge
unidirectional, “top-down”, aiming at the financial development of societies
of Empirical Fruition (IFE). On Friday, an index is defined based on values considered fair
Castro (2014) highlights that the focus on the empirical enjoyment of a right researched in a context
less developed.
The contrast between IFE and PVJ can reveal to the jurist discrepancies in the enjoyment of a
for each of the institutional conducts analyzed, giving rise to the Validation Standard
Legal (PVJ). The graph below attempts to provide an approximate illustration of this procedure:
social demands that such reforms be structured from the bottom up, “towards higher levels”
law, as well as offering insights into possible recommendations for improving
high' of normative references”. In this way, AJPE joins the NDD approach and
criticism of the dominant theoretical framework regarding the impropriety of legal reforms
73
social experience, through proposals for public policy reforms. In that regard,
Machine Translated by Google private or public, these defined as the result of institutionalized negotiations, in the
nationalities, according to AJPE, are also interconnected by these links, the
which are distinguished by containing content described in terms of monetary assets also in
The second analytical strategy is called “New Contractual Analysis” (CASTRO,
unit of analysis with the purpose of observing the conditions of enjoyment of a given
AJPE's second analytical strategy allows the translation into legal terms of the transmission
2010), or “Portfolio Analysis” (CASTRO 2014), which makes use of contractual aggregates as
utility clauses (CASTRO, 2010).
private (CASTRO, 2014). The figure below illustrates this organization of contractual clauses of the
these specify obligations translated into pecuniary values, those describe a
Considering that all market economies have contractual aggregates
AJPE.
74
utility of the economy. This situation changes only in cases of financial contracts,
mandatory minimum requirements (as provided for by law, administrative act or construction
All economically relevant contracts have two ideal types of clauses:
made up of different combinations of these four types of clauses and that the economies
actual content or utility clauses; and monetary content clauses. While
jurisprudential), without any possibility of removal through contractual negotiation
right taking into account how certain contents (especially monetary ones) and their
Furthermore, both types of clauses can convey content of interest
variation arising from intercontractual relationships may affect such enjoyment. According to AJPE,
scope of legislative, judicial and administrative processes, which often determine
Goods and services produced in the real economy (determination made through private negotiation).
legislative process, for example).
Figure 4 – New contractual analysis
legislative process, for example).
clauses
M' U' Provision of goods and services produced in the real economy (determination carried out through institutionalized negotiations –
M Monetary Clause
Amount of money or financial asset transacted (determination made through private negotiation). Private Interest
Source: Adapted from Castro (2010, 2014).
Public interest Provision of financial resources (determination made through institutionalized negotiations –
U Utility Clause
Machine Translated by Google contractual aggregates to maintain investment levels, which could mean
a powerful analytical tool to evaluate unilateral actions by foreign jurisdictions, in
United States (Locality A), as the amendment of clause M' in the United States
transnational impact of unilateral conduct by countries on interest clauses
The figure below illustrates this dynamic with the following hypothetical situation: the Locality
absence of instruments such as the AJPE leaves these connections between contractual aggregates to the
that foreign states intervene in a qualitatively different way in economic policy,
public.
(Location A) may represent gains from regulatory arbitrage, which would force Group W,
contract between Groups Y and W, even if agreed under the jurisdiction of Location B, the
In this sense, Castro (2014) states that, with the AJPE, jurists now have
75
Brazil, for example, will also be affected by the unilateral change in M' promoted by the
as the consumption of families in Location B.
basic interest rate. The contractual aggregate that binds Groups X and Y – which can be
margin of any juridical argumentative opposition, relegating subjects such as “wars
financial institutions and investors, respectively – will be affected. However, the aggregate
exchange rates”, for example, to deliberation solely within the scope of politics and economics
A – a country like the United States, for example – changes through processes
and, in this way, there is a transmission of impacts originating from different monetary policies. A
Brazilian financial institutions, for example, having to realign the other clauses of their
institutionalized, such as the administrative process, the mandatory content of Clause M', the
credit enhancement. This, in turn, could affect the enjoyment of fundamental rights,
Location B
Group X
U-Clause U' clause
Group Y
M-Clause M'- Clause
Figure 5 – Transnational transmission of economic policy changes
Group W
Location A
Source: Own preparation.
Contractual Aggregates and their clauses:
Machine Translated by Google (credit, foreign exchange, derivatives, sovereign debt, etc.), whose conclusions identified gaps
Armed with these two strategies and guided by the search for justice, the jurist could,
Finance.
The legal theory of finance founds the beginnings of a political economy of finance (PISTOR,
Legal Theory of Finance ( PISTOR, 2013a). All eleven
The Legal Theory of Finance (TJF) proposes greater importance of the legal structure
the time, form and conditions under which non-economic values and interests should
This theoretical discourse originates from the multidisciplinary effort of a research program
efficiency and cost/benefit analysis (CASTRO, 2005, 2009). AJPE intends to serve this way
funding through the market mechanism, strengthens dependence on economic relations
leadership by Katharina Pistor (Columbia University). After two years, the group, which includes
individual and the preservation of social values. By giving the jurist a form of access
(CASTRO, 2014). Castro (2007) illustrates the coordination of economic policies already taking place in
dependency would explain only part of the current complex intersection between finance and law.
joint effort: ten case studies on different segments of the financial market
wealth and consumption patterns.
theoretical and alternative approaches. The set of these analyzes inductively gave rise to a
distributive effects of legal rules, which puts it in an opposite position to the Law and
(law in finance) – both influenced by a hierarchical systemic structure of power.
in the face of decision-making dilemmas arising from economic policy, to access casuistry and analytically
3.3. Legal Theory of Finance (Law in Finance)
2013a, 2013b).
articles were published in a special edition of the Journal of Comparative Economics.
called Global Finance and Law Initiative, with academics from several universities, under the
prevail, or not, over economic considerations based strictly on criteria of
of financial markets: the reality of contemporary finance, marked by the rise of
76
of an instrument capable of guiding legal decisions aimed at both the promotion of freedom
in relation to the commitments capable of being compulsorily applied by the State. That
jurists, sociologists, political scientists and economists, presented in 2013 the result of the
It is, in fact, a symbiotic relationship in which the latter is part of those – law in finance
informal scope, although it may have, as seen, a wide impact on the creation and distribution
to inequalities in the enjoyment of rights, the AJPE completely discards the neutrality of the effects
Machine Translated by Google of rules, whether legal or not. TJF does not take them, however, as a mere sum of
markets and became influential from the 1970s onwards (SHAMOS, 2013; GILSON and
precaution is necessary to deal with possible liquidity shortages. On the other hand, the lack of
to the exacerbation of the also unstable nature of finance. The third asserts the existence of
Shamos (2013) observes that Pistor (2013b) builds the theory in a bottom-up view,
diversification of investments, which affects both banks and other intermediaries
market, which depends on the premise that all relevant information is available
finance hierarchy. The last draws an association between the position occupied within that
Information increases market efficiency, which diverts the search for a superior solution.
of financial contracts whenever necessary (PISTOR, 2013b).
increasing the farther from the center.
future (PISTOR, 2012).
The legal theory of finance, in general, is confronted with the premise of
stylized ones”, which, according to Pistor (2013b, pp. 317), should be understood as the ground for a
financial markets as primary units of analysis, without existence outside a context
– the scientific justification of a political ideology contrary to government regulation of
financial intermediary entities and agents, such as Law and Finance (PISTOR, 2009).
unique circumstances, not reducible to calculation of probabilities, prevent the adequate and
of highly complex financial assets. The second maintains that the law contributes
KRAAKMAN, 2014). Pistor (2012) maintains that even the hypothesis of the relative efficiency of
Liquidity is a risk that cannot be fully covered through the liquidity strategy.
a pre-established order of fulfillment of contractual obligations, which shows a
hierarchy, polarized between center and periphery, with the binding force of legal norms
to market participants, is counterproductive as it results in the false notion that more
vulnerable to such lack of liquidity. This fact prevents the occurrence of renegotiation
77
In fact, the level of information about the present and the past does not reduce uncertainty about the
This approach is also articulated around four initial perceptions, or “facts
The inductive and empirical construction of this theory has the particularity of welcoming the
new theoretical map for empirical observation of finance. The first emphasizes that nature
neoclassical economics of market efficiency, cornerstone – albeit in a distorted way
The TJF adopts, in contrast, two interconnected premises: the fundamental uncertainty of
the market and the volatility of its liquidity84 . On the one hand, an uncertain future, which presents
Liquidity is defined by Pistor (2013b) as the “ability to sell an asset for another or even for currency” (pp. 316). 84
Machine Translated by Google from these same institutions to monetary resources. In this sense, sovereignties would be the
legal between them.
conceived as a hybrid product of public and private rules (GELPERN and GULATI, 2013).
more renegotiations necessary to overcome a financial crisis, for example.
on their respective currencies and the greater part of their debts in currency terms
through contractual interconnections and self-references. It resonates by itself
connections, as a complex of interdependent contractual obligations (IOUs –
of this approach. Mehrling (2012) states that the various financial instruments, such as
issued both by private agents, such as derivatives, and by public entities, such as
depends on respect for the commitments set out therein, influenced by positive law and
quantitatively, but also qualitatively. It also maintains that the hierarchical position
domestic or foreign and also in terms of domestic or foreign currency (PISTOR, 2013b).
bottom-up, while neoclassical economics – here developed through the Law
equivalent to legal structures, composed of networks of links between contractual obligations
emit them. The position in the hierarchical structure, according to Mehrling (2012), depends on access
Law and Finance literature falls on the agents, while Law in Finance highlights the bonds
institutions with greater resources, since they are, in the last instance, the ones that have as much control
purely private contracts and those that include sovereign nations, markets are
form (PISTOR, 2013b). Furthermore, these legal commitments could further complicate
Pistor (2013b) notes that the legal nature of markets emerges as a network of
This approach would be able, therefore, to explain the scope and reaction of the markets,
A hierarchical and dynamic financial system is also part of the initial perceptions
national currency, foreign currencies, gold, Treasury bonds, are not only different
Interdependent web of contractual obligations), a category that includes financial instruments
conceptualization of financial asset, conceived, by Pistor (2013b), as a contract whose value
78
sovereign debt securities, which can be issued in state jurisdiction
interpretation of regulators and the judiciary. Once considered that the financial markets
between them reflects the different hierarchy between the bodies, entities and financial institutions that
self-referenced and predetermined, it would be possible to predict how chain reactions would take place.
and Finance – view markets from top to bottom, top-down. In this way, the emphasis of
Incidentally, because of this characteristic of inserting within the same analytical category
Machine Translated by Google quality of assets, there is debt execution and credit contraction. This oscillation between
lower risk of default, while the opposite side was composed of the private sector. In your
domestic85 – which would be linked to the debt socialization capacity of their sovereignties
hierarchically superior to securities issued by banking entities, which would be
The notion of hierarchy in the financial system goes beyond national borders. Mehling
(2012a) points out that, in times of financial crisis, when the qualitative hierarchy of assets
(MEHRLING, 2013). Thus, government bonds traded by the Treasury would be
expansion movement, there is a quantitative increase in credit and qualitative differences between
nationwide, is occupied by the institution with the greatest capacity to refinance its own
79
debts – in this case, a sovereignty represented by its own central bank –, that is, with
the Keynesian view at one pole and the monetarist view of the economy at the other (MEHRLING,
it is also a cardinal point of the theory of legal finance. The financial system is thought of as
a structure in constant movement, sometimes expanding, sometimes contracting, whose apex, in
2012). The figure below illustrates the dynamics of the monetary system:
higher than those issued by companies, for example (MEHRLING, 2012).
assets are irrelevant. In the reduction movement, the different hierarchies are accentuated
The dynamism of the financial system as conceived by Mehling (2012a, 2012b)
one movement and another would find a counterpart in business cycles, between the prevalence
85
Figure 6 – Dynamics of expansion and contraction of the monetary system
Source: Adapted from Mehrling (2012b).
Pistor (2013b) and Mehrling (2013) point out that discrepancies are observed regarding the perception of each country's ability to refinance its own debt. In this sense, Mehrling (2012) observes that the foreign exchange market is an indicator that there is also a hierarchy in terms of the resources available to each sovereignty, with a large advantage for the United States, since the dollar has become an international currency.
Machine Translated by Google Free translation of “probability that ex ante legal commitments will be relaxed or suspended in the future” (PISTOR, 2013b, pp. 320). 86
because of falling real estate prices. This process ended up spreading, in the case of
which, in turn, depends on having (i) control over its currency and (ii) the issuance of a majority of
and regulatory issues throughout this hierarchical system, particularly in times of crisis. That would be
The application of the concept of elasticity of law added to the conception of a system
found it more difficult to receive their payments (RONA-TAS and GUSEVA, 2013).
differentiated from law through the concept of elasticity, defined as “the probability of
between sovereignties is unequal (MEHLING, 2012a; PISTOR, 2013b). To illustrate, Mehling
hierarchical classes. For example, Rona-Tas and Guseva (2013) show that loans
there was questioning of its ability to pay, regarding the use of the dollar as currency
of divergence between what was foreseen and what actually happened in the future, the greater the
more costly as, with the emergence of the financial crisis of 2008, there was appreciation
The existence of hierarchy among financial assets raises the question about their
startles, investors change their investment portfolio, initially getting rid of
finance, where entities and institutions considered essential for the
prevented from refinancing debts and began to foreclose on such mortgages, with significant losses
sovereignties with large resources and capacity to refinance their own debts, the
Hungary, for other sectors of the real economy, such as telephony, in which companies
of financial market participants reveals the differentiated application of contractual rules
are fully applied, resulting in involuntary exits from the system (PISTOR, 2013b).
your debts in that same currency. Based on these criteria, the distribution of financial power
opposed to the uniform legal application of the rule of law. Pistor (2013b) conceives this application
hierarchical monetary system allows the visualization of the existence of hierarchies within the
Based on illustrations like this, Pistor (2013b) argues that the periphery of localities
real estate purchases made by Eastern European consumers in foreign currency have become
(2012a) cites both Ireland, which was unable to refinance itself using its own currency, as
a legal commitment to be relaxed or suspended in the future”. , so the greater the chance
80
international market and increased demand in times of crisis.
elasticity of law. While the right tends to be more elastic at the apex of the system
of these currencies, such as the Swiss franc, and banks, faced with the credit crunch, found themselves
structural survival, law tends to be inelastic at the periphery, where legal rules
those lower quality assets. In this sense, the best assets will be issued by
impacts on the effectiveness of legal rules. Pistor (2013b) maintains that behavior
86
Machine Translated by Google (Pistor, 2013b). The contemporary financial market presents dynamics that seek to increase
historical circumstances. Pistor (2013b) cites as an example the success in wars in the case of
those who push aside legal rules are also constituted by binding rules, only
the premise that non-state entities have limited resources by definition, therefore,
current situation of financial interdependence, is not capable of reducing the fragility of those before crises
2013). Furthermore, the TJF stipulates that the migration from a relationship-based finance model
direct control of the rules applicable to global finance and indirect control through intermediaries
guarantor of this asset will only remain as such until its own survival is
2013b). In this way, the law lends credibility to the system, by conferring
The Legal Theory of finance builds on these four premises a vision of how
by the financial system in relation to the enforcement capacity of legal systems
abandoned in times of crisis and consequent search for lower risk assets guaranteed by
monetary policy (PISTOR, 2013b). Its design is based on four other propositions. A
peripheral areas of the financial system carry, in the case of the real estate market, not only the risk
The second highlights the necessarily hybrid nature, public and private, of
The third consists of the suggestion of a paradoxical relationship between law and finance
However, the position occupied in the hierarchy of the financial system results from
of returns and dilution of risks through the diversification of investments which, due to the level
necessarily legal. This rejects the idea of markets "outside" the rules, because even
Sovereign State as guardian of the survival of the system. This essential hybridity
United States, in addition to highlighting that the strengthening of this superior position from the
built through the delegation of normative production to the private sector (HODGSON,
even if there is currency or financial assets in circulation not backed by a sovereign, the
systemic. This, in turn, harms compliance with legal stipulations (PISTOR, 2012,
at stake (PISTOR, 2013b). Furthermore, this asset not backed by sovereignty tends to be
domestic financial institutions with transnational operations.
personal to another organized through the market mechanism entails greater dependence
greater confidence for investors in the fulfillment of contracts. In times of crisis, however,
81
contemporary finance operates both in times of expansion and contraction
(GILPERN and GULATI, 2013; PISTOR, 2013b).
sovereignties capable of refinancing their own debts (MEHRLING, 2013).
financial markets, as a consequence of dependence, ultimately, on the performance of the
of the loan, but also the risk of the currency itself.
The first emphasizes that financial markets are systems of binding rules, not
Machine Translated by Google (CARRUTHERS, 2013, PISTOR, 2013a, 2013b)
(RONA-TAS and GUSEVA, 2013, PISTOR, 2013a, 2013b)
Theoretical Formulations
Financial markets are necessarily public and private.
Empirical Evidence The emergence of new highly complex financial assets, such as derivatives, although regulated by private rules,
Source: Own preparation.
(PISTOR, 2013a, 2013b)
Figure 7 - Empirical evidence of the Legal Theory of Finance
The position occupied by an entity within the hierarchy of the financial system determines the strength with which the law will be applied in the future, with changing circumstances. Countries with more access to resources, control of their currency and their debts, have greater political discretion.
(MEHRLING, 2013, PISTOR, 2013a, 2013b)
Crises show the existence of preferences regarding financial assets, based on the institution that guarantees them. The central banks of countries affected by the crisis acted as guardians of the survival of the financial system, even though the crisis originated in the private sector.
The complexity of financial assets requires legal protection. In times of crisis, however, the full application of the law represented a risk to the survival of the financial system. Law and Finance are paradoxically related.
Where right is elastic, power becomes prominent.
Financial markets are equivalent to systems of binding rules. it has limits, which was observed in the 2008 crisis. These limits put pressure on the legal acceptance of these new contractual forms in all jurisdictions.
global, determined by the five largest central banks, the US FED, the ECB,
by sovereignties with more access to resources, Pistor (2013b) argues that the
full enforcement of the law would result in the destruction of the financial system, even though
2013b). the suspension of previously stipulated standards mitigates the credibility of the system (PISTOR,
sovereignties with control of their currency and their own debt. In this sense, Mehling (2012)
TJF formulations.
(2013b) uses this differential relationship with law as the very definition of power.
82
In this way, combined with the premise that the apex of the hierarchy in the financial system is occupied
from Japan.
individuals and groups in the financial system, attention is drawn to the discretion of decision-making
state decision on who should be excluded from the general effectiveness of the right. By the way, Pistor
The figure below organizes the empirical evidence that supported the four
The fourth associates the elasticity of law with the political economy of finance. Before the
mentions that economic stabilization measures, for example, would depend on the policy, within the
existence of different legal treatments based on the hierarchical position occupied by
of the European Union, the Bank of England, of the United Kingdom, the SNB, of Switzerland, and Nippon Ginko,
Machine Translated by Google from a model guided by autonomous administrative agencies to another with greater
that will determine the future of the system (PISTOR, 2013b).
survival of the system, whether globally or domestically (PISTOR, 2013b).
The Legal Theory of Finance, as a predictive approach, still risks stipulating
financial system to be mutually beneficial to central countries, through the increase of
important to the survival of the system, and consequently the level of resources to be
eventually mobilized for its stabilization in a post-crisis moment. Still, in
future stages of the development of financial markets. First, despite the expansion of
This hypothesis is worrying as recent regulatory changes
Third, the TJF predicts that this proximity of financial market participants
decisions made by those at the center, market participants
in relation to the center of the financial system will increase the number of groups considered
83
financiers will seek to place themselves close to the group responsible for making crucial decisions to the
other financial market participants, known as interest groups with
periphery of the system (PISTOR, 2013b).
Second, as in financial turmoil the survival of the system depends on
great capacity for mobilizing resources (GADINIS, 2013; GERDING, 2013).
returns, and to peripheral countries, with a reduction in the cost of credit, the consequences of crises
promoted by the United States, with the enactment of the Dodd-Frank Act, represented the migration
financial resources are unequally distributed, with full application of the right only to the
political participation, which can increase the lobbying influence of financial institutions and
Ultimately, the TJF predicts that it will be the policy of the country occupying the apex of the global system
Machine Translated by Google involved identification and microeconomic analyzes of unprecedented scope, with results,
While limited to the academic environment, theories provide subsidies to the understanding of
may lose jobs and savings and, worst of all, faith in society and hope for the future
represent a turning point in empirical research in the study of finance, economics
of econometric modeling (DAM, 2006; KAPLAN and ZINGALES, 2014). Furthermore,
political position on top of a scientific tower, which not only disqualifies speeches
political actors to serve political goals (GILSON and KRAAKMAM, 2014). However,
from a geographical, thematic and methodological point of view, whether due to the impact on scientific production
institutional and legal and economic history (GLAESER and SHLEIFER, 2002; GRAFF,
studies, and the contradictions found are fundamental for progress in science (KUHN,
the mere progressive adoption of formal rules (PISTOR, 2009; KREVER, 2013).
This approach, for example, systematized previously non-existent data. To the
and regulatory policy.
- SOME REVIEWS
in the academic production of the theme object of this study, seems to some extent to represent
to a small number of countries (KAPLAN and ZINGALES, 2014). Law and Finance literature
in general, and financial development in particular, matter in the real world.
most of the time, deciphered in accessible, robust and objective language, not depending
legal reforms can be the cause of serious damage, because when the law fails, people
academic debate, this theoretical perspective has proved influential, in large part, for
world, but when they enter political reality, theory is inevitably modified by
(MICHAELS, 2009a). The political appropriation of academic theories seems to isolate decision-making
comparative law and comparative law (SPAMANN, 2008; MICHAELS, 2009a), whether from the points
combined multidisciplinary thoughts, from corporate finance theory, economics
arising from it.
if in the academy the theoretical limitations find fertile ground for the deepening of
contrary to it, but also reduces the right, in democratic societies, to build
2008).
84
1996), this does not happen when theories are used as justification for political discourse
Law and Finance, an approach dealt with in the second section and which occupies a dominant position
comparative empirical research until then involved extensive and therefore restricted descriptions
example of improper mutation of explanatory theory into normative theory. When it comes to the
Theories that attempt to explain how legal institutions relate to the economy,
Theoretical approaches involving law raise specific ethical questions:
Machine Translated by Google 87 Although the Law and Finance methodology influenced the Doing Business World Bank Report, the study most relevant to the design of this Project was developed by economist Hernando de Soto, who analyzed the process of formalizing business and its impediments in Peru (WORLD BANK, 2015 ). See Section 2.2.3.
There was even an inference of causality in the sense that the civil law resulted in greater
of publicly traded companies as a continuous conflict between investors and shareholders
head of the institution) (MILHAUPT and PISTOR, 2008), reveals questionable symbiosis from the point of view
two studies were identified that can be pointed as the poles of this perspective
their scope, relied not only on the resources of the World Bank, but also on its
PORTA et al., 2008), and also contributed to the consolidation of two new fields of
most recent consolidation, by La Porta et al. (2008), more sophisticated version identified
Used, however, as a basis for legal recommendations from organizations
of this dominant framework already coincided with the positions then adopted by the World Bank
superiority of the common law legal tradition over the continental law tradition
Law and Finance approach abandoned the controversial and thought-provoking academic character to the
This literature was responsible for the significant increase in research on the role
Parallel to the political appropriation of academic theories, this study found that,
grounded in the idea of legal transplants from English and French legal traditions.
corporate, with an emphasis on investor protection (DAM, 2006). Inaugurated a conception
concentration of ownership.
and authors typically associated with this literature, such as Simeon Djankov (former economist
does not present itself in a monolithic manner. According to the literature review carried out,
controllers, whose balance is determined by legal variables (COFFEE, 2001; LA
view of the sociology of science. Quantitative research in Law and Finance, great in terms of
theory: on the one hand, the initial study by La Porta et al. (1997, 1998) and, on the other hand, the
expressly as a theory about origins. The earliest conclusions pointed to a certain
research, law and finance and the new comparative economy (MICHAELS, 2009).
prestige on the international stage for its advertising. Furthermore, the first conclusions
85
international institutions, whose renown inspires general credibility, such as the World Bank, the literature of
since the mid-1990s.
European in relation to financial development and economic performance, thesis
contrary to what is sometimes cited in works of the genre, the Law and Finance literature
of legal institutions on economic development, as well as on governance
in-depth research: it gained the status of a truth, a legal remedy for structural ills, through projects such as
Doing Business87 . In fact, the relationship between this institution
Machine Translated by Google which legal institutions are relevant to the process of economic development
state abuse and more adaptive solutions to market changes, while civil law would have its
static infrastructure that, once established, does not interact with social, economic,
refer to the political-social context: the concentration and decentralization of power that occurred,
Motivated by this literature, it fueled discussions about the strengths and weaknesses of the methods
legal and financial development as an upward linear graph where more rules
private.
glorious and French, which occurred in the 17th and 18th centuries. Now, in both explanations, the
quantitative, attempts to translate the complexity of law into more malleable, transparent terms
that is, with the effectiveness of legal norms, the multifunctionality of rules is underestimated
financial markets and improved economic performance.
literature review carried out, the literature on the origins does not provide grounds for the
that inform legal norms. It is the implicit defense of a model that refers to
The most recent conclusions consolidated in La Porta et al. (2008) discard
variations in legal protections for investors – the legal tradition adopted by countries –
Despite these contradictions, Law and Finance was responsible for establishing the idea of
from social and economic circumstances – common law offers the best defense against
(MICHAELS, 2009a). It was found that the interdisciplinary dialogue between Law and Economics
economic. Pistor (2009) identified in Law and Finance the interpretation of law as a
Glaeser and Shleifer (2002) the two origins of variations between common law and French civil law
virtues with regard to the implementation of public policies and disorder control in the sector
and politicians. In this way, the literature on origins conceives the relationship between institutions
respectively, in France and England, from the Middle Ages, as well as the liberal revolutions,
quantitative and qualitative. On the one hand, the literature on origins, based on method
political-social context emerged as a determinant of the legal norms adopted at the time. At
Although origins theory embraces concerns that go beyond formal law,
in accordance with a given previous prescription would be associated with greater robustness of
and simple for the general public. Furthermore, the use of statistical quantification techniques in
86
and principles of law, as well as the role played by informal surrogates and values
However, the explanation given by this theoretical approach about the determining factor of
reasons why this same context would not produce more inflections on the legal system.
contradicts the very conception of law that is immune to the social changes underlying it. Second
any absolute superiority of these two traditions, preferring relative superiorities to
Max Weber, who saw law as a rational normative system prior to activity
Machine Translated by Google that politics may determine the timing of legislative changes, but it does not determine the
information about the growing integration of the global economy. Still, the method
et al, 2009; SPAMANN, 2008). In general, the globalization of law and its variations
policy (PAGANO and VOLPIN, 2005; ROE, 2000). Stulz and Williamson (2003), for example,
A second strand of competing theoretical approaches to Law was also identified.
KERHUEL, 2009).
different norms from different legal systems can perform the same functions, which
that religion is a more important determinant of creditor protection. La Porta et al.
main thesis asserted by it would not be sustained from some historical facts, such as the
As a result, the complementarity of methods was perceived in the sense that both
alternatives to the Law and Finance literature and its recipe for transnational legal transplants.
explanatory factor armed with the perception that the origins overlap with it, as they bring
began to pay greater attention to the functionality of legal rules (LA PORTA et al, 2008)
study of legal institutions allowed for an expansion of the scope of research, which had not previously been
were based on the codification of laws and a quantitative method similar to that used by
changes in the right to political and economic arrangements, the reply is based on the argument that
extensively descriptive method proved to be incapable of meeting the needs of systematization
format of institutional solutions, these would be the result of welcoming the origins.
concern with the empirical reality and the simplicity of exposing the results (ARMOUR
other factors such as culture (LICHT, GOLDSCHMIDT and SCHARWTZ, 2007) and economics
qualitative also proved to be essential for improving the precision of concepts and clarifying how
borders require a new approach for new analyzes (FAUVARQUE-COSSON and
compare religious traditions and their philosophical position on the charging of interest, to sustain
and Finance, which see the theory of origins as a product of history, as the
(2008), precursors of the dominant framework, refute studies focused on culture as a
dispels misunderstandings of the quantitative method.
This study outlined a descriptive overview of some of the main approaches
pragmatic origin of Roman Law (MALMENDIER, 2009) or even the apex of the force
87
quantitative research, usually carried out by economists, in the field of law and finance
Three lines of competing theoretical views were identified. The first refers to studies that
the definition of legal tradition from the concept of ideology. As for studies dealing with
LLSV. These studies, however, explore the hypothesis that the origins are mere proxies of
carried out by conventional comparative law. On the other hand, a qualitative approach
as qualitative research, generally carried out by jurists, began to have greater
Machine Translated by Google However, the lack of a single or even dominant concept of
of corporate governance and financial development are mediated by the characteristics
for their concern with the distributive effects of legal rules and which highlight the
of each country. In fact, this conclusion that legal transplants in themselves are not elements
researchers involved with this doctrine. Prado (2010), for example, suggests as a challenge
very different visions. The first of them, New Law and Development, clashes with
informal arguments that rule out the need for changes in positive law. That is, the impact of
version of Law and Development, around the beginning of the 1970s (TRUBEK and
He cites the right to property, which can mean different institutions from the perspective
of time. Coffee (2001), for example, shows that the British and Americans developed
interdisciplinary research involving economic institutions, legal institutions and the search
potential ethnocentrism and legal imperialism that involves the export of legal models
legal.
French economy at the beginning of the 20th century (RAJAN and ZINGALES, 2003). In that line,
Specifically with regard to financial development and performance
SANTOS, 2002) and even projects such as Doing Business.
It was found that the consequences of any legal reform with an impact on the structure
development in the reviewed literature of this theoretical approach hinders the union between
alternatives to Law and Finance. It is argued that this group brings together views that are similar
institutional design nationally appropriate to social, economic and political circumstances
institutional aspects of the system in which they are inserted, with the possibility of influencing norms
existence of systemic asymmetries in the effectiveness of legal norms, even though they are
sufficient to change economic institutions would have already been achieved by the first
the occurrence of different meanings for institutions that lead to development.
GALTANTER, 1974). Furthermore, this movement would also have already clarified the
reforms depends on the prior institutional arrangement and its parallel development over the course of
too much about its cohesion and structure. In fact, it appears to be more of a field of
adopted, like that of the rich or the poor. With the emergence of new concepts of
88
very different forms of corporate governance, despite belonging to the same tradition
by development.
between countries, which again gained strength with neoliberal legal globalization (SOUZA
economic, studies such as that of Schapiro (2011) support the need to build a
follow studies by Cheffins, Bank and Wells (2012), Roe (2006) and Coffee (2001) for example.
The present study dedicated a separate section to a third line of theoretical approaches
Machine Translated by Google However, the fact that AJPE focuses on empirical research as a way of accessing
and Development. Trubek (2012) points to the need for scholars in the area to open
inherently intertwined with other social and legal institutions. From this new perspective, the
systemic process of unilateral decisions that alter the contents of the contractual aggregates that
national and global macro design on financial development without first
finance, is perceived as vulnerable to distortions, with reduced ability to access the real
doctrine.
contract to four categories of clauses, subdivided, in general, into public/private and
insights into the legal paths for distributing benefits and costs resulting from
propositions. Two points of the AJPE seem to operate a certain revolution in legal thought
For financial development in a global perspective, it seems to matter more
that transversally affect an entire contractual aggregate, such as exchange rate, interest rate
right. This is conceived less as a metaphysical entity, autonomous from other
development, such as that of Jackson (2011), which separates economic growth from
transmissions of contractual amendments initiated by negotiated decisions take place
compulsory.
de Prado (2010) on the existing conflicting potential within the New Law doctrine itself
distributive effects of legal norms reduces the ability of this approach to draw a
to the conception of the subjective right as a gradient of fruition, centered on the holder of the right and
theoretical view, the jurist now has an analytical tool capable of visualizing the impact
eyes to those potential political conflicts that may arise from the normative vision inherent in the
binary criterion for coding laws into indices, basic to the method employed by Law and
constitute the economy. This approach allows this to happen by reducing the content
academic production on the subject. Even so, this vision is capable of launching relevant
in monetary/real. From this, it becomes possible to identify the relative weight of clauses
The second, the Legal Analysis of Economic Policy, presents greater cohesion of its
fruition of rights of creditors and shareholders, for example.
state decisions on issues today dominated only by economic discourse.
89
dominant. The first of them refers to the abandonment of formal categories for the treatment of
AJPE's second key point: its instrumental purpose for identifying how
basic income, taxes and minimum mandatory content, such as payment of dividends
institutionally (judicial, administrative-regulatory and legislative processes). Through this
development, to the point of suggesting that the former can prevent the latter, seems to strengthen the fear
social or legal institutions and obedient to a binary criterion of existence or not. What's wrong?
Machine Translated by Google empirical evidence, its propositions in their final version have not yet been fully
taken as an example the advances in expanding the scope of research in comparative law
same social order imbued by the sense of justice (CASTRO, 2012) – passively assists the double
compared (SPAMANN, 2008). However, this study found that there was still a slight reaction due to
These new conceptions challenge the dominant theoretical framework by abandoning the emphasis on
strictly on the criterion of economic optimization deteriorate advances already achieved in fruition
Economy, at domestic and global levels, as a continuous process in which these spheres
how the law works, but also regulations on how it should work. And what else
changes in the law itself. In this sense, Fauvarque-Cosson and Kerhuel (2009) warn that
Although there is still controversy about the relevance of the role of law in
The disadvantage of being recent and, therefore, still having reduced production
purely economic discourse and the degradation of objects protected by legal norms.
studies and the influence of their research on public opinion.
Legal Theory of Finance (TJF). Despite being a theory formulated inductively, based on
legal and economic institutions. The interdisciplinary dialogue proved to be beneficial for both,
as a maintainer of order and defense of already assured rights and as a transformer of that
tested. Even so, the TJF offers insights into the uneven structure of the financial system.
(DEAKIN and SIEMS, 2009) and the conceptual and functional correction of research in economics
dominance of economic discourse. On the one hand, legal changes that are based
of rights. On the other hand, the economic discourse seems to monopolize political discussions about
individual attitudes of countries and draw the structural interaction between Politics, Law and
part of jurists against strictly economic considerations, not just positive ones, on
90
influence each other.
What is surprising is that the silence of legal scholars comes at the cost of maintaining control over the
jurists should take economists as an example of how to improve the relevance of their
Faced with this situation, the jurist, who has a dual role towards society - both
academic can also be attributed to the third alternative approach discussed in Section 3.3, the
financial development, the certainty of interaction between institutions
Machine Translated by Google fixed or universal (MALMENDIER, 2009; PARGENDLER, 2012a). Search results
economic development in general and financial development in particular. Secondarily,
There was a connection both with the contractualist view of the company, which refers to Coase
support theories about the origins (LA PORTA et al., 2008), a sophisticated way that brought together
adopted legal tradition – argue that, faced with social problems, common law countries
(1976), from which the Law and Finance literature borrows the concern with agency costs
as possible gaps to be filled by research in the area. Based on the growing
1998 to 2008. The statement that the right can be quantified expanded the scope of research
state action (DJANKOV et al., 2003a). Finally, the theory of origins argues that there are
carried out took as a starting point the study by Pistor (2012) on the dominant theoretical view
theory, Law and Economics, Law and Finance departs from it by emphasizing that differences between
right (see Section 2.1.1.). Through statistical correlations considered robust, the literature
generically as Law and Finance.
- FINAL CONSIDERATIONS
would have a central influence on corporate governance and financial development
each country, such as common law and civil law, although such categorization is not definitive,
main theoretical views that explain how legal institutions interact with
under this theoretical framework also pointed to distinct state behaviors based on the
The first one was devoted to the origins of this discourse, based on the premises adopted by it.
Secondly, the four propositions that
we sought to identify the role reserved for the jurist by each of these theoretical discourses, as well as
(1937, 1960), as well as Jensen and Meckling's theory of the ownership structure of the firm
the main conclusions reached over ten years of academic research in the area,
reinforce pro-market legal institutions, while French civil law countries reinforce the
comparative studies on legal institutions, but has been criticized for providing an incomplete picture of the
importance of finance for development and for the enjoyment of rights, research
(see Section 2). Although this dual inheritance is also associated with another approach
91
about the regulation of the financial system, constant in the literature that became known
legal traditions and between the functioning of judicial bodies in different countries of the world
on origins associates variations of legal institutions with legal traditions followed by
(LA PORTA et al., 2000a).
This monograph was written with the aim of tracing a contemporary panorama of
This predominant theoretical framework (Law and Finance) was described in three moments.
Machine Translated by Google 88
between legal institutions and economic institutions, aiming at a policy model
. As an explanatory theory, the
to investors, in the period between 1930-1970 (see Section 2.2.1.); and (iii) theories that identify
projects from international organizations are supported, such as Doing Business, from the World Bank,
local circumstances in each country. The Legal Analysis of Economic Policy, approach
of legal changes (see Section 2.2.1.). As a predictive theory, the literature on the origins
about origins, as mentioned by Kevin Davis
The third section of this monograph described three theoretical approaches
aims to combine the institutional conditions for the enjoyment of rights with considerations on the
influence of origins. They face, however, three types of competition: (i) from theories that
welcomed by them, even though the 2008 financial crisis, for example, seems to have
Finance. The New Law and Development is presented as a doctrine or a field
(ACEMOGLU, JOHNSON and ROBINSON, 2001); (ii) of studies that highlight events
impact of law on economic performance, even though each legal tradition has,
adopted against the crisis, by authorities within different traditions (see Section
development, brings together authors who seem to share awareness about the interactions
In a third moment, the three possible interpretations of the theory were discussed.
economic drivers of development and that remains nationally adequate to the
growth in the American capital market even after the increase in legal protections
Financial development must embrace legal institutions typical of common law. In it
political economy and informal social institutions as primary factors for understanding
which recommends legal reforms based on theses arising from the Law and Finance literature.
also cohesive and structured, it is described as an analytical tool for jurists, who
holistic approach, which contrast with the assumptions and prescriptions belonging to the Law and
Law and Finance propositions aim to associate current financial development with
anticipates what types of solutions will be designed by States based on legal tradition
economic dynamics of economic policy (see Section 3.2.). Finally, the legal theory of
92
see origins as mere proxies for other factors, such as colonial past
represented an inflection point towards more convergence between medicines
of studies (see Section 3.1.), which, although harboring diversity of views on the
2.2.2.). As a normative theory, origins theory holds that countries that aspire to
in different circumstances, particular virtues (LA PORTA et al., 2008).
historical backgrounds contrary to the foundations of literature on origins, such as the small
88 See note 62.
Machine Translated by Google Finance, based on the premise of instability inherent to the financial system, in the progressive
Section 3.3.).
dependence of finance on the law, as well as on the existence of a monetary system
hierarchical with ramifications from the global to the national economy, it links all
With the presentation of the discussions throughout the sections above, and their evaluation (see
Section 4), the work sought to contribute to clarifying the terms of the contemporary debate
financial institutions to the same structure in which power is asymmetrically distributed
93
on relevant legal aspects concerning the regulation of financial markets.
according to the possibility of future suspension or relaxation of legal commitments (see
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