[T]he ideal of individual liberty seems to have flourished chiefly among people where, at least for long periods, judge-made law predominated"(Hayek, 1973, p. 94) Recently, economists have produced evidence that financial markets contribute to economic growth and legal institutions contribute to the growth of financial markets. King and Levine(1993) demonstrate that the rate of increase in per capita gross domestic product(GDP)is greater in countries with more developed financial markets. La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998; 1997)(hereafter LLSV, 1998 and LLSV, 1997) find evidence that the extent to which a country's corporate laws protect the interests of minority investors is an important determinant of the cost of external capital. They also, interestingly, find that countries whose legal systems are derived from the common law tradition provide superior investor protections on average, particularly in comparison to the French civil law tradition. Levine(1999)and Levine, Loayza and Beck(1999) find that better investor protections are associated both with more developed financial markets and faster economic growth Levine(1999), Levine Loayza and Beck(1999)and LLSV(1998 )treat legal origin as nstrumental variable for financial development. Legal origin is well suited to the purpose. It is largely exogenous, as most countries have had their legal systems imposed by colonization or conquest. Legal origin also correlates strongly with policies(such as creditor and minority shareholder protections) that on the basis of theory and empirical results should lead to greater financial market development. The authors do not, however, provide an explanation for the correlation. Corporate law seems an unlikely place to find a systematic difference between2 “[T]he ideal of individual liberty seems to have flourished chiefly among people where, at least for long periods, judge-made law predominated” (Hayek, 1973, p. 94). I. Introduction Recently, economists have produced evidence that financial markets contribute to economic growth and legal institutions contribute to the growth of financial markets. King and Levine (1993) demonstrate that the rate of increase in per capita gross domestic product (GDP) is greater in countries with more developed financial markets. La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998; 1997) (hereafter LLSV, 1998 and LLSV, 1997) find evidence that the extent to which a country’s corporate laws protect the interests of minority investors is an important determinant of the cost of external capital. They also, interestingly, find that countries whose legal systems are derived from the common law tradition provide superior investor protections on average, particularly in comparison to the French civil law tradition. Levine (1999) and Levine, Loayza and Beck (1999) find that better investor protections are associated both with more developed financial markets and faster economic growth. Levine (1999), Levine Loayza and Beck (1999) and LLSV (1998) treat legal origin as an instrumental variable for financial development. Legal origin is well suited to the purpose. It is largely exogenous, as most countries have had their legal systems imposed by colonization or conquest. Legal origin also correlates strongly with policies (such as creditor and minority shareholder protections) that on the basis of theory and empirical results should lead to greater financial market development. The authors do not, however, provide an explanation for the correlation. Corporate law seems an unlikely place to find a systematic difference between