CoChat
Sign Up
Cited by 508Corporate Finance and GovernanceFirm Innovation and GrowthEconomic Growth and Productivity

Law, Stock Markets, and Innovation

BROWN, JAMES R., MARTINSSON, GUSTAV, PETERSEN, BRUCE C.·2013·The Journal of Finance
DOI 10.1111/jofi.12040
Open this paper in CoChat — free account

Abstract

ABSTRACT We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long‐run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Integrity signals

Registry

Crossref · 10.1111/jofi.12040

Cites

6 of 6 references verified0 citation errors · 0 not checkable

Statistics

Claims the paper makes

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • Legal systems that protect shareholder rights boost firm growth.

    “boosting firm growth.”

    From Finance, Growth, and Inequality (2021) · cites this paper as Brown, Martinsson, and Petersen (2013)

    The paper reports a positive relation between stock-market access and small-firm growth in value added and productivity (p. 5). It also finds that stronger legal investor protections are associated with greater use of external equity (A. Law and Firm Stock Issues, p. 22). Together these support an indirect link, but the claim presents legal protections as directly boosting firm growth generally, beyond the small-firm result reported here. (LLM, conf=0.84)

    Experimental — accuracy not yet measured

  • Legal systems that protect shareholder rights foster R&D investment, especially among smaller firms.

    “(b) foster R&D investment, especially among smaller firms, boosting firm growth.”

    From Finance, Growth, and Inequality (2021) · cites this paper as Brown, Martinsson, and Petersen (2013)

  • Legal systems that protect shareholder rights facilitate firms' ability to issue shares.

    “They find that legal systems that protect shares (a) facilitate the ability of firms to issue shares”

    From Finance, Growth, and Inequality (2021) · cites this paper as Brown, Martinsson, and Petersen (2013)

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

The self-check needs the paper’s full text.

Cites

Flagged first, then by citations

Research works printed but not linked: 41

  1. Acemoglu, Daron, and Simon Johnson, 2005, Unbundling institutions, Journal of Political Economy 113, 949-995.
  2. Acs, Zoltan J., and David B. Audretsch, 1988, Innovation in large firms: An empirical analysis, American Economic Review 78, 678-690.
  3. Aghion, Philippe, George-Marios Angeletos, Abhijit V. Banerjee, and Kalina Manova, 2010, Volatility and growth: Credit constraints and the composition of investment , Journal of Monetary Economics 57, 246-265.
  4. Aghion, Philippe, Philippe Askenazy, Nicolas Berman, Gilbert Cette, and Laurent Eymard, 2012, Credit constraints and the cyclicality of R&D investment: Evidence from France, Journal of the European Economic Association 10, 1001-1024.
  5. Aghion, Philippe, and Peter Howitt, 2006, Appropriate growth policy: A unifying framework, Journal of the European Economic Association 2-3, 269-314.
  6. Beck, Thorsten, Asli Demirgüç-Kunt, Luc Laeven, and Ross Levine, 2008, Finance, firm size, and growth, Journal of Money, Credit and Banking 40, 1379-1405.
  7. Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine, 2000, A new database on financial development and structure, World Bank Economic Review 14, 597-605.
  8. Beck, Thorsten, Asli Demirgüç-Kunt, and Vojislav Maksimovic, 2005, Financial and legal constraints to growth: Does firm size matter? Journal of Finance 60, 137-177.
  9. Beck, Thorsten, and Ross Levine, 2002, Industry growth and capital allocation: Does having a market- or bank-based system matter? Journal of Financial Economics 64, 147-180.
  10. Beck, Thorsten, and Ross Levine, 2004, Stock markets, banks, and growth: Panel evidence, Journal of Banking and Finance 28, 423-442.
  11. Beck, Thorsten, and Ross Levine, 2005, Legal institutions and financial development, in Claude Menard and Mary J. Shirley, eds.: Handbook of New Institutional Economics (Springer, New York).
  12. Bekaert, Geert, Campbell Harvey, and Christian Lundblad, 2005, Does financial liberalization spur growth? Journal of Financial Economics 77, 3-55.
  13. Bekaert, Geert, Campbell Harvey, Christian Lundblad, and Stephan Siegel, 2007, Global growth opportunities and market integration, Journal of Finance 62, 1139-1168.
  14. Brown, James R., Steven M. Fazzari, and Bruce C. Petersen, 2009, Financing innovation and growth: Cash flow, external equity and the 1990s R&D boom, Journal of Finance 64, 151-185.
  15. Brown, James R., and Bruce C. Petersen, 2010, Public entrants, public equity finance and creative destruction, Journal of Banking and Finance 34, 1077-1088.
  16. Brown, James R., and Bruce C. Petersen, 2011, Cash holdings and R&D smoothing, Journal of Corporate Finance 17, 694-709.
  17. Carlin, Wendy, and Colin Mayer, 2003, Finance, investment and growth, Journal of Financial Economics 69, 191-226.
  18. Demirgüç-Kunt, Asli, and Vojislav Maksimovic, 1998, Law, finance, and firm growth, Journal of Finance 53, 2107-2137.
  19. Demirgüç-Kunt, Asli, and Vojislav Maksimovic, 2002, Funding growth in bank-based and marketbased financial systems: Evidence from firm-level data, Journal of Financial Economics 65, 337-363.
  20. Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2003, Courts, Quarterly Journal of Economics 118, 453-517.
  21. Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2008, The law and economics of self-dealing, Journal of Financial Economics 88, 430-465.
  22. Griliches, Zvi, 1998, R&D and Productivity: The Econometric Evidence (The University of Chicago Press, Chicago, IL).
  23. Hall, Bronwyn H., and Josh Lerner, 2010, The financing of R&D and innovation, in Bronwyn H. Hall and Nathan Rosenberg, eds.: Handbook of the Economics of Innovation (North-Holland Elsevier Publishers, Amsterdam).
  24. Jones, Charles, and John C. Williams, 1998, Measuring the social return to R&D, Quarterly Journal of Economics 113, 1119-1135.
  25. Khurana, Inder K., Xiumin Martin, and Raynolde Pereira, 2006, Financial development and the cash flow sensitivity of cash, Journal of Financial and Quantitative Analysis 41, 787-807.
  26. Kim, Woojin, and Michael S. Weisbach, 2008, Motivations for public equity offers: An international perspective, Journal of Financial Economics 87, 281-307.
  27. La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2006, What works in securities laws? Journal of Finance 61, 1-32.
  28. La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2008, The economic consequences of legal origins, Journal of Economic Literature 46, 285-332.
  29. La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny, 1997, Legal determinants of external finance, Journal of Finance 52, 1131-1150.
  30. Larraín, Borja, 2010, Stock market development and cross-country differences in relative prices, Review of Economics and Statistics 92, 784-797.
  31. Levine, Ross, 1998, The legal environment, banks, and long-run economic growth, Journal of Money, Credit and Banking 30, 596-613.
  32. Levine, Ross, 1999, Law, finance, and economic growth, Journal of Financial Intermediation 8, 8-35.
  33. Levine, Ross, 2005, Finance and growth: Theory and evidence, in Philippe Aghion and Steven Durlauf, eds.: Handbook of Economic Growth (North-Holland Elsevier Publishers, Amsterdam).
  34. Levine, Ross, Norman Loayza, and Thorsten Beck, 2000, Financial intermediation and growth: Causality and causes, Journal of Monetary Economics 46, 31-77.
  35. Levine, Ross, and Sara Zervos, 1998, Stock markets, banks, and economic growth, American Economic Review 88, 537-558.
  36. Love, Inessa, 2003, Financial development and financing constraints: International evidence from the structural investment model, Review of Financial Studies 16, 765-791.
  37. McLean, R. David, Tianyu Zhang, and Mengxin Zhao, 2012, Why does the law matter? Investor protection and its effects on investment, finance, and growth, Journal of Finance 67, 313-350.
  38. Rajan, Raghuram G., and Luigi Zingales, 1998, Financial dependence and growth, American Economic Review 88, 559-586.
  39. Rossi, Stefano, and Paolo F. Volpin, 2004, Cross-country determinants of mergers and acquisitions, Journal of Financial Economics 74, 277-304.
  40. Schwab, Klaus, Michael Porter, Jeffrey Sachs, Andrew Warner, and Macha Levinson, 1999, The Global Competitiveness Report 1999 (Oxford University Press, New York).
  41. Wurgler, Jeffrey, 2000, Financial markets and the allocation of capital, Journal of Financial Economics 58, 187-214.

Cited by

Sorted by citations

Authors
BROWN, J. R., MARTINSSON, G., & PETERSEN, B. C.
Affiliations
  • Iowa State University (US)
  • Stockholm School of Economics (SE)
ORCID
Venue
The Journal of Finance
Publisher
Wiley
Published
2013-07-16
Volume
68
Issue
4
Pages
1517-1549
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/jofi.12040
OpenAlex
W1953911860
Cited by
508
References
6
Citations by year
2026: 44 · 2025: 52 · 2024: 70 · 2023: 54 · 2022: 51 · 2021: 40 · 2020: 48 · 2019: 32 · 2018: 27 · 2017: 25 · 2016: 18 · 2015: 18 · 2014: 13 · 2013: 10 · 2012: 5
FWCI
76.34
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
  • The Journal of Finance (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Iowa State University Digital Repository (Iowa State University) (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Firm Innovation and Growth
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
Keywords
shareholder protection, stock market development, R&D investment, innovation, credit market development, fixed asset investment, small business, equity financing, legal norms, intangible investment, economic growth

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review