Summary

Rafael La Porta and Robert W. Vishny wrote Law and Finance in 1998 illustrates the legal rules to protect corporate or majority shareholders and creditors, and stealing from minority shareholders by taking advantage of using international laws. Rafael contributed that developed countries normally protected as shareholder, and developing countries are easy to be stolen from developed countries. The reason is because the international law system for protecting shareholder is made by US-style. After the end of the Cold War, most developed countries wanted to make their countries like US as free-market capitalism. The policy and regulation were made more US-like which protects shareholder who invested money in company, but this law does not protect a founder of company. Moreover, the international law give an authority to shareholder to choose a president of company which company they invested. And developing countries’ companies are mainly invested by developed countries’ companies. Eventually, developed countries’ companies have authority than developing countries’ companies.

It is considered seminal because this paper influenced many scholars by examining legal rules covering protection of majority shareholders and creditors. This paper let me think why developed countries still have power than developing countries. It is because developed countries’ companies are investing a lot of money into developing countries’ companies. Under the international law, the shareholders have authority to choose a company of president. Eventually, developed country have more authority than developing countries. This paper has 19293 citations. It is a hot scholarly debate topic because there are some scholars who do not think that there is big difference between common law countries and French civil law countries. I am interested in this source because it shows how historically the US became the most powerful economy in the world, and it can recognize the difference between developed countries and developing countries.

In my opinion, I totally agree with the argument that developed countries have authority to be protected by international law because developed countries have a lot of money to invest in a developing country’s company. So, when developed countries become crisis, developing become crisis as well because developing countries’ company rely on investment of developed countries. However, the article fails to address that not all developing countries are losing money, for example, China is developing countries but they are economy are growing fast. Overall, I agree with author that developing countries’ companies rely on developed countries’ companies.

 

Source Citation:

Rafael La Porta, Florencio Lopez‐de‐Silanes, Andrei Shleifer, and Robert W. Vishny, “Law and Finance,” Journal of Political Economy 106, no. 6 (December 1998): 1113-1155.