Overall, the above discussion suggests that firms in countries with stronger legal frameworks will have more overall investment and better asset structures. which in turn will be reflected in higher growth rates. To empirically test whether firms in countries with better legal frameworks indeed experience higher growth rates, we use a setup to assess the relationship between financial development and growth similar to the one used by rajan and zingales(1998, RZ). In particular, we test whether industrial sectors that typically use a lot of intangible assets grow faster in countries with stronger property rights. In addition to testing the effects of property rights on firm growth, we directly test the asset substitution effect by investigating whether firms in countries with weaker property rights invest less in intangible assets. We also directly explore the supply of external financing effect by investigating the relationship between the strength of legal rights and the amount of long-term debt extended by lenders per unit of fixed assets. In what follows, we develop testable regression specification for these three hypotheses Let there be m countries, each indicated by index k, and n industries, each indicated by index j. The first set of equations relate the growth in real value added of a firm in a particular country to a number of country and firm-specific variables. The law and finance effect is measured by the interaction term between the typical external dependence variable for the particular sector and the country's level of financial development. The argument of RZ is that financially dependent firms grow more in countries with a higher level of financial development. This equation also allows us to disentangle the law and finance effect from the asset substitution effect. We do this by testing directly whether growth is higher for firms that typically use a lot of intangible assets in countries with good protection of property rights. Specifically, aquation (1a) extends the basic model in rz by adding a variable that is the interaction of the typical ratio of intangible to fixed assets and the property rights inde In line with RZ, we use US firm data to construct proxies for the typical external dependence for a particular industry and the typical ratio of intangible-to-fixed assets for a particular industry. The presumption here is that the Us financial markets are well developed and that property rights are protected well in the US such that firms are at the optimal external financing and asset structure point for their respective industrial sector Followin RZ, we add in the regression the industry's market share in total9 Overall, the above discussion suggests that firms in countries with stronger legal frameworks will have more overall investment and better asset structures, which in turn will be reflected in higher growth rates. To empirically test whether firms in countries with better legal frameworks indeed experience higher growth rates, we use a setup to assess the relationship between financial development and growth similar to the one used by Rajan and Zingales (1998, RZ). In particular, we test whether industrial sectors that typically use a lot of intangible assets grow faster in countries with stronger property rights. In addition to testing the effects of property rights on firm growth, we directly test the asset substitution effect by investigating whether firms in countries with weaker property rights invest less in intangible assets. We also directly explore the supply of external financing effect by investigating the relationship between the strength of legal rights and the amount of long-term debt extended by lenders per unit of fixed assets. In what follows, we develop testable regression specification for these three hypotheses. Let there be m countries, each indicated by index k, and n industries, each indicated by index j. The first set of equations relate the growth in real value added of a firm in a particular country to a number of country and firm-specific variables. The law and finance effect is measured by the interaction term between the typical external dependence variable for the particular sector and the country’s level of financial development. The argument of RZ is that financially dependent firms grow more in countries with a higher level of financial development. This equation also allows us to disentangle the law and finance effect from the asset substitution effect. We do this by testing directly whether growth is higher for firms that typically use a lot of intangible assets in countries with good protection of property rights. Specifically, equation (1a) extends the basic model in RZ by adding a variable that is the interaction of the typical ratio of intangible to fixed assets and the property rights index. In line with RZ, we use US firm data to construct proxies for the typical external dependence for a particular industry and the typical ratio of intangible-to-fixed assets for a particular industry. The presumption here is that the US financial markets are well developed and that property rights are protected well in the US such that firms are at the optimal external financing and asset structure point for their respective industrial sector. Following RZ, we add in the regression the industry’s market share in total