Legal Protection, Investors Choose And Financial Development

The development of financial system is a necessity of economic stable growth。With the indepth research of the relationship between financial system operation efficency and economic growth, law and finance theory becomes the most dynamic forefront field of finance. Law and finance theory is a new interdisciplinary study arising from the United States in the late 20th century. The theory research the effect of investor protection to financial development through comparing different institution. When financial system is rooted in a sound system frame, financial development can give the great impact on economic development. The probe into the financial development of various countries from the angle of investor protection of law has theoretical and practical meaning to China's financial development.After the open policy, China's financial development made the unprecedented achievements. Financial department has experienced the change of teller to a most important part of the nation. However, the present financial system needs to be improved. With the development of economy, how shall we promote the financial development and make it play the heart role? Under such circumstances, we use law and finance theory to research the effect of investor protection to financial development.By affecting the external financing, the law system guarantees the legal protection of investor and furthermore affects the financial development. According to the claiming right of cash flows by investor's behavior, investor's rights can be divided into shareholder's rights and creditor rights.The dissertation is divided into 3 parts:the first part, chapter one and chapter two introduce the research background and review the domestic and foreign literatures. Chapter 3,4 and 5 analyze the effect of law institution and it's enforcement protecting investor to financial development. The last chapter is the conclusion.The main body and research results as follows:Chapter one introduces the research background,purpose and structure. Chapter two reviews relevant literatures and analyzes the main contents of law and finance theory.Chapter three focuses on the effect of creditor rights'legal protection on credit market. First, we analyze the effect of creditor protection to creditor behavior choice through model; second, we use cross section data to analyze the effect of legal protection to credit market, empirically; last, we draw the conclusion:the promoting of legal protection can enhance the safety of loan, the bank's loan will and capital efficiency, but lower the bank's screen cost.Chapter four studies the effect of shareholder's rights'legal protection level on stock market. First, we analyze the effect of legal protection of shareholder to stock market development; second, we use cross section data to analyze the effect of legal protection to stock market, empirically; last, we draw the conclusion:shareholder protection affect entrepreneurs invest decision, the claiming right of cash flows and the ownership concentration of company; disclosure and liability standards are very important to stock market development.Chapter five explores the effect of the law institution and it's enforcement on investor behavior choice. First, we induct bank's screening cost to analyze law enforcement to investor behavior, which developed the model of Jappelli et al. (2005); second, using China's panel data and cross section data from different country analyze law enforcement to financial development, empirically; last we draw the conclusion:law enforcement is positively related to financial development, which can lose borrower's credit constraint and increase loan supply; law enforcement is important to China's financial development and bank loan maturity.The last part is conclusion. It summarizes the whole paper and points the possible direction of law and finance theory in the future.