Shareholder Protection in the USA and Germany

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German Working Papers in Law and Economics

AUTHOR:
Udo C. Braendle

TITLE:
Shareholder Protection in the USA and Germany - On the Fallacy of LLSV

SUGGESTED CITATION:
Udo C. Braendle (2006) "Shareholder Protection in the USA and Germany - On the Fallacy of LLSV", German Working Papers in Law and Economics: Vol. 2006: Article 18.
http://www.bepress.com/gwp/default/vol2006/iss1/art18

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ABSTRACT:
“Law matters” is the message in several articles of LaPorta et al., which influence economic as well as legal literature. The results of their heavily cited Law and Finance article highlight the much better shareholder protection of Common Law compared to Civil Law countries. In this contribution I reconsider their “ntidirector rights index” for Germany and the United States, two typical representatives of their respective legal tradition. By having a close look at the legal provisions of the two countries I illustrate the weaknesses and pitfalls of the index. Bothering German Company Law, I find that Germany would score much better in this index. Moreover, I point out inconsistencies in the judgment of the USA. In conclusio the differences between Common and Civil Law in terms of shareholder protection are far less significant than LaPorta et al. propose, if at all. The blindfold citation of this article can (and does) implicate wrong politicaleconomic measures and should therefore be avoided.