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Legal origin, financial development, and innovation: evidence from large public and private firms in the U.S. and Europe

Author

Listed:
  • Lorenzo Caprio

    (Università Cattolica del Sacro Cuore)

  • Silvia Rigamonti

    (Università Cattolica del Sacro Cuore)

  • Andrea Signori

    (Università Cattolica del Sacro Cuore)

Abstract

This paper investigates the interplay between legal origin, financial market development, and the growth and innovation patterns of the population of large firms in U.S. and Europe. We document that common law countries (namely U.S., U.K., and Ireland) are characterized by a higher degree of stock market development and an increased propensity of firms to be publicly traded relative to Continental Europe. We also find that firms based in common law countries are more innovative, consistent with the view that market-based systems are more capable of financing intangible assets than bank-based systems. Also, these systems are effective at accelerating firm growth, as large firms in common law countries are sensibly younger and went public earlier than their Continental European peers, and this is particularly true for innovative firms.

Suggested Citation

  • Lorenzo Caprio & Silvia Rigamonti & Andrea Signori, 2020. "Legal origin, financial development, and innovation: evidence from large public and private firms in the U.S. and Europe," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(4), pages 905-925, December.
    • Handle: RePEc:kap:jmgtgv:v:24:y:2020:i:4:d:10.1007_s10997-019-09500-1
    DOI: 10.1007/s10997-019-09500-1
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    References listed on IDEAS

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    Cited by:

    1. Stolbov, Mikhail & Shchepeleva, Maria, 2020. "What predicts the legal status of cryptocurrencies?," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 273-291.
    2. Wen, Jun & Zhang, Sen & Chang, Chun-Ping, 2022. "Legal origins and innovation: Global evidence," Technological Forecasting and Social Change, Elsevier, vol. 174(C).

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    More about this item

    Keywords

    Legal origin; Financial development; Listing status; Innovation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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