A Reviev Of Law And Finance Theory And Its Implications In China

Law and finance theory concerns the impacts of investor protection to finance. La Porta et al. find that the investor protection in common law countries is better than the one in civil law countries represented by France and Germany. They ever tried to find the causes of differences in investor protection in different legal origins and the effects that the differences bring to corporate governance. Levine et al. used the investor protection to explain the differences in financial development and economic growth in different countries. Many scholars studied the theory and offered some debates and countervailing theories. Some researchers explored the situations in China with law and finance theory. They found that the practices in China partly advocate the law theory of corporate governance but cannot support the law theory of financial development well.This paper systematically presents the predominant literatures in this area, including the theory of law and finance and its controversies. This paper also contains the researches in China. After a concise review of the theory of law and finance, the author offers some recommendations to the development of China's capital market relying on the law and finance theory and the fundamental one is investor protection.