Law And Finance: Theory Study And Evidence From China

1. Backgrounds and SignificanceThe traditional financial law and the research on finance are separated for a long time. The research on financial law are focus on conceptual law or law explanations; while finance are focus on financial assets pricing and balanced analysis of financial market. The discussion of risk management technology of financial resources under the fixed rule, and the influence of the right and the responsibility factor to the financial order evolution in the financial transaction, vanish from the vision of main financial scholars. This disregard to the financial reality and the order question causes the reeducation the explanation of finance and the law academic to the financial order evolution process.For the reality of finance development in our country, the system construction appears more urgent. Many difficult problems in financial reforms and development always involved the aspects of law and the financial. The law often becomes the important endogenous variable, which restrict further development of the Chinese finance. The practice of Chinese financial legislation and the financial law reform urgently needs theoretical support, also the reality summon the development of law and the finance study in China.2. Structure and ContentsFirst chapter law and financial theory---research on the essential need of financial development and economic growth. The author firstly divide law and the financial research into macroscopic law and the financial theory and microscopic law and the financial theory, which focus more on the newest(2000-2007) research achievement. Finally the author points out that although the law and the financial theory have many insufficiencies, but it has powerful explanation to many questions in finance. The future research to Chinese law and finance should be based on the Chinese reality. Second chapter Britain and America common law and statute law。The recently research indicates that the different law origin causes the different social economy result. The reason is that different legal system has different applicability and the protection degree to private property right is different. In this part, we take trust law as an example to analyze the different influence of common law system and continental law system to financial development. Finally, we thoroughly analyze this question: why France and Britain chosen different legal framework?Chapter three Law and financial theory: research on two simple models. To full understanding the intrinsic decision mechanism of legal system to financial system - - finance intermediary and financial market, in this part, we will construct two simple financial theory model to reveal this kind of intrinsic relation. Chapter four Law and financial development: what we have known? What we haven't? This chapter we mainly discuss relations of law and the economic financial development, think that the law indeed is important in the economic financial development, but the law itself will not automatically lead to be successful of the economical finance. Therefore the suitable law will be necessary, but it is not be the sufficient condition for sustainable growth.Chapter five Legal system arrangements and financial development: Theoretical analysis and international experience. We put forward the new theory proposition system arrangements and the financial develop, and separately make use of the transnational cross-section data and Chinese time series data examines this theory for the first time. The research has discovered that: the property right structure, the legal system and the financial groups has the remarkable influence to the financial development.Chapter six economic developments and development of law and finance: experience evidence from Chinese panel data. We use data from 1980 to 2004; make use of technology of panel data to research relations among the Chinese law, the financial development and the economic growth.Chapter seven Law, financial theory and Chinese financial law transformation. The research on western law and the financial theory shows the importance of law, the government by law and the supervision to the financial development, but its theory and the policy dispute that cultural tradition restricts the law reform to financial development. The country's system environment and the constraints should be the factor which must be paid attention to closely. This chapter we have discussed the question of the way dependence caused by Chinese financial law transformation and the cultural tradition.Chapter eight The law, the investor protection and the reform of Chinese stock market management structure. This is a specific application of law and financial theory.Chapter nine Legal system flaws, government regulation and recessive contract. This chapter is another applied analysis of law and the financial theory. The final two chapters are also an attempt of the author to realize the law and the financial theory localization.3. Main Points in this PaperWe discuss that:(1)Although the law and the financial theory also have many insufficiencies, but it has powerful explanation to many questions in financial domain, some conclusions have enlightenments to our country. In the future, the research should be based on Chinese reality, which needs localization of the law and the financial theory.(2)The trust law is the symbolic difference of Britain and America common law and statute law. The law is important in the economic financial development, but the law itself will not automatically cause the economical finance to be successful, therefore the suitable law will be necessary, but will not be the sufficient condition for sustainable growth.(3)From the aspect of the international experience, the property right structure, the law system and the financial groups have remarkable influence to the financial development.(4)Our research on the panel data analysis discovers(:a)perfect law system, will promote the financial intermediary growth as well as the efficiency, which will be helpful in deepening of financial depth;(b)simultaneously is helpful to promote banking industry's competition, but this effect will be different in the different local; ( c ) in the reform period of Chinese Stock market, the incompleteness of law possibly causes the official law system not work. This indicates: In period of transformation in China, enforcement mechanism beside some official laws is possibly more effective to the financial development. In order to make the legal framework operate effectively, the reforming economy should develop mechanism except the law enforcement.(5)The research on western law and the financial theory show the importance of law and the government by law as well as the supervision to the financial development, no matter the financial development causes the law to transform or the law origin decides the financial development model, this country's system environment and the constraints should be the factor paid attention to closely. Law and the financial theory must be localization, the Chinese.4. Research Methodology and InnovationThis article is based on the theory research and the empirical study, the qualitative analysis and the quantitative analysis, adopts the static cross-section data and the multivariable return and the correlation analysis, the quarter data and the monthly data, the multivariable VAR system research and the panel data analysis methods, as well as the case analysis, the method of game theory and so on, have discussed the law and the financial theory thoroughly, and analyzes Chinese law, the financial development and the question of economic growth, and proposes feasible suggestions.In this paper:(1)Systematically summarizing the current research development of law and financial theory(up to 2007);(2)It has breakthrough in the angle of aspects, the author expands the research angle to relational discussion of law, the financial development and the economic growth. This causes us have the new understanding to the financial development and the economic growth, also have a more reasonable explanation to"secret of the Chinese"called by oversea scholars.(3)At present the massive research indicates that the law and the financial theory are suitable to China, which has a certain explanation and the instruction to Chinese economic financial development, simultaneously it must consider the actual condition. But there is still a long way to make law and the financial theory localization and Chinese. The final two chapters are the exploring attempt by the author. Perhaps these three aspects are the biggest innovations of this paper.5. Insufficiencies and Future Research DirectionLaw and the financial theory were first proposed by LLSV in 1998, moreover majority research results of this theory are on the basis of Western developed country. Although the author attempts to find the constraints, and discover the localization and Chinese of law and the financial theory, China is establishes the financial government by law in the glorious Confucianism culture tradition and in the planned economy system, inevitably, the discovery to constraints is not far enough, other scholars can be able to continue to consummate. Moreover, in the article the two law and the finance theoretical models we discussed are also from overseas, but there is no model for China. So far, there is still not a satisfying model to be possible to interpret the relations of law, the financial development and the economic growth. This insufficiency and regret possibly be the direction which the author should continue in the future.6. Explanations(1)This paper research mainly uses the real diagnosis method, the comparative analysis method as well as the case analysis method in econometrics. Because so far still there is not a satisfying model to be possible to explain the relations of law, the financial development and economic growth, the majority research are based on the experience study, this article research use the same technique with the existing literature.(2)In the article"law"mainly refers to the law of corporation, the law of contract, the bankruptcy law, and the securities law. We process like this, do not mean that the other law are unimportant to the topic, in fact, there has been literatures to discuss the influence"labor law"to company management and finance(Berglof,1999); the influence of The news law to the company management(Zingales,2003).(3)Considered the Chinese reality, in article empirical study analysis of financial development mainly focuses on finance intermediary; particularly the bank. The reason is that the bank is still at the absolute position in Chinese financial system.Localization of law and the financial theory is difficult. The author does now is a shallow exploration. Frankly speaking, until now the author also waits for further depth to many important questions, even does not remove the possibility of wrong viewpoints in this paper. Because of this, the author sincerely hopes to obtain everybody's suggestions, for your wisdom will be advantageous in improving the finiteness of author rationality.