ANALYSIS FOR: Law, finance, and economic growthin China$ Franklin Allena,, Jun Qianb, Meijun Qianb
Essay 2：You are required to write a reflective essay on a pre-assigned article. Your reflective essay shall cover
(1) a BRIEF summary of the paper,
(2) whether you agree / disagree with the arguments made by the authors, and why?
(3) Your own reflection the on economic / financial phenomenon in China and suggestions for future reforms.
(4) words count at least 2000 words, detailed reference needed
Attention for the followings things
You should indicate the source of the quote. ‘Cutting and pasting’ from electronic sources must also be attributed in the same way. Using someone else’s ideas, without attribution is also plagiarism.
Law, finance, and economic growthin China$
Franklin Allena,, Jun Qianb, Meijun Qianb
aThe Wharton School, University of Pennsylvania, Finance Department, Suite 2300 SH-DH,
Philadelphia, PA 19104, USA
bFinance Department, Carroll School of Management, Boston College, Chestnut Hill, MA 02467, USA
Received 6 January 2003; received in revised form 18 May 2004; accepted 24 June 2004
Available online 1 April 2005
China is an important counterexample to the findings in the law, institutions, finance, and
growth literature: Neither its legal nor financial system is well developed, yet it has one of the
fastest growing economies. While the law–finance–growth nexus applies to the State Sector
and the Listed Sector, with arguably poorer applicable legal and financial mechanisms, the
Private Sector grows much faster than the others and provides most of the economy’s growth.
The imbalance among the three sectors suggests that alternative financing channels and Introduction
Several related strands of literature on law, institutions, finance, and economic
growth have emerged in financial economics in recent years, and their impact on
other areas of research has been significant. First, La Porta, Lopez-de-Silanes,
Shleifer, Vishny (LLSV hereafter) and others have produced a substantial body of
empirical evidence that links the origin of a country’s legal system to the country’s
institutions and financial and economic ‘‘outcomes.’’ One of the central results of
this literature is that countries with English common-law origin (French civil law
origin) provide the strongest (weakest) legal protection to both shareholders and
creditors (LLSV, 1998, 2000a). Countries withEnglishorigin also seem to have
better institutions, including less corrupt governments (LLSV, 1999), more efficient
courts (Djankov, La Porta, Lopez-de-Silanes, and Shleifer, DLLS hereafter, 2003),
and more informative accounting standards (LLSV, 1998). Better legal protection
and better institutions, in turn, lead to better outcomes for the financial system, both
at the aggregate and firm levels.1 Related to the LLSV results, there is a recent body
of literature that attempts to understand why and how a country’s legal origin affects
the country’s institutions, and how legal origin and institutions, both jointly and
separately, affect economic and financial outcomes.2
The second strand of literature champions the view that the development of a
financial system that includes a stock market and intermediation contributes to a
country’s overall economic growth(e.g., McKinnon, 1973). Recently, researchers
have strengthened this view by presenting supporting empirical evidence at the
country level (e.g., King and Levine, 1993; Levine and Zervos, 1998), as well as at the
industry and firm level (e.g., Rajan and Zingales, 1998; Jayaratne and Strahan,
1996). The third strand of literature provides evidence for the link and causality............................
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