Abstract: Questioning "Law and Finance": U.S. Stock Market Development, 1930-1970

Steven A. Bank, Brian R. Cheffins, and Harwell Wells


An important tenet of a burgeoning "law and finance" literature is that stock market development is contingent upon corporate law offering ample protection to shareholders. This paper addresses this point, using as its departure point developments occurring in the United States between 1930 and 1970. We show that, contrary to what the law and finance literature would predict, the United States during this period and throughout the twentieth century generally lacked corporate law that provided extensive rights to shareholders. We also point out that while federal securities legislation introduced in the mid-1930s bolstered investor protection, reform did not energize the stock market in the manner implied by law and finance analysis.