CORPORATE LAW'S LIMITS I. The Argument: Corporate Law as Propelling Diffuse Today's most powerful and most widely-accepted academic explanation for why continental Europe lacks deep and rich securities markets is the purportedly weak role of corporate and securities law in protecting minority stockholders, a weakness that is said to contrast with America's strong protections of minority stockholders. A major European- wide research network, leading financial economists, and leading legal commentators have stated so. One can imagine the nobel prize winning Franco Modigliani shaking his head in disappointment when writing that nations with deficient legal regimes cannot get good stock markets and hence,the provision of funding shifts from dispersed risk capital [via the stock market].. to debt, and from stock and bond] markets to institutions, i.e., towards intermediated credit. In a powerful set of important articles insightful economists showed that deep securities markets correlate with an index of basic shareholder legal protections These protections are important: " IP]rotection of shareholders .. by the legal system is central to understanding the patterns of corporate finance difference countries. Investor protection [is] crucial because, in many ountries,expropriation of minority shareholders.. by the controlling shareholders is extensive. Leading legal commentators have signed on to the law-driven theory At the same time. international agencies such as the Imf and the World Bank have admirably promoted corporate law reform, especially that which would protect minority stockholders. The OECD has had major initiatives to improve corporate governance, both in the developing 1. La Porta, Lopez-de-silanes Shleifer(1999); La Porta et al. (1998), at 1136- 37 and(1997), at 1138; Bebchuk(1999); Becht Roell, (1999), Carlin Mayer(Oct 998,at3;, Coffee(1999) 2. Modigliani Perotti(1998), at 5; see also Modigliani Perotti(1997) 4. La Porta, Lopez-de-Silanes, Shleifer vishny (2000), at 4 5. See Coffee(1999) 6. The IMF's joumal, Finance Development, tells us that"improved governance [institutions] are essential parts of economic reform programs in many countries. " Iskander, Meyerman, Gray Hagan(1999)6 CORPORATE LAW’S LIMITS I. The Argument: Corporate Law as Propelling Diffuse Ownership Today’s most powerful and most widely-accepted academic explanation for why continental Europe lacks deep and rich securities markets is the purportedly weak role of corporate and securities law in protecting minority stockholders, a weakness that is said to contrast with America’s strong protections of minority stockholders. A major European￾wide research network, leading financial economists, and leading legal commentators have stated so.1 One can imagine the Nobel Prize winning Franco Modigliani shaking his head in disappointment when writing that nations with deficient legal regimes cannot get good stock markets and, hence, “the provision of funding shifts from dispersed risk capital [via the stock market] ¼ to debt, and from [stock and bond] markets to institutions, i.e., towards intermediated credit.”2 In a powerful set of important articles insightful economists showed that deep securities markets correlate with an index of basic shareholder legal protections.3 These protections are important: “[P]rotection of shareholders … by the legal system is central to understanding the patterns of corporate finance in difference countries. Investor protection [is] crucial because, in many countries, expropriation of minority shareholders ¼ by the controlling shareholders is extensive.”4 Leading legal commentators have signed on to the law-driven theory.5 At the same time, international agencies such as the IMF and the World Bank have admirably promoted corporate law reform, especially that which would protect minority stockholders.6 The OECD has had major initiatives to improve corporate governance, both in the developing 1. La Porta, Lopez-de-Silanes & Shleifer (1999); La Porta et al. (1998), at 1136- 37 and (1997), at 1138; Bebchuk (1999); Becht & Röell, (1999); Carlin & Mayer (Oct. 1998), at 33; Coffee (1999). 2. Modigliani & Perotti (1998), at 5; see also Modigliani & Perotti (1997). 3. See La Porta et al. articles, cited supra note 2. 4. La Porta, Lopez-de-Silanes, Shleifer & Vishny (2000), at 4.. 5. See Coffee (1999). 6. The IMF’s journal, Finance & Development, tells us that “improved corporate governance [institutions] are essential parts of economic reform programs under way in many countries.” Iskander, Meyerman, Gray & Hagan (1999)