The importance of legal systems for portfolio investment in the developing world

Hoon Lee, Joseph L. Staats, Glen Biglaiser

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Building on recent works showing the role that legal institutions can play in attracting foreign investment to developing countries, and drawing on insights obtained from Powell and Rickard (International Interactions 36: 335–362, 2010), we demonstrate that developing countries with common law legal systems attract greater portfolio investment than countries that have civil law or Islamic legal systems because common law systems are more inclined to promote the rule of law and protect property rights and can be understood to provide more efficiency in the law, better contract enforcement, more judicial autonomy and more market-oriented regulations. We base our findings on an analysis of time-series panel data for 99 countries covering the period 1980–2007.

Original languageEnglish (US)
Pages (from-to)339-358
Number of pages20
JournalInternational Area Studies Review
Issue number4
StatePublished - Dec 2012

Bibliographical note

Copyright 2016 Elsevier B.V., All rights reserved.


  • Portfolio investment
  • common law
  • legal systems
  • property rights
  • rule of law

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