The core institutions that support strong securities markets

A strong securities market rests on a complex network of supporting institu tions that ensure that minority shareholders (i) receive good information a bout the value of a company's business, and (ii) can have confidence that a company's managers and controlling shareholders won't cheat them out of mo st or all of the value of their investment. A country whose laws and relate d institutions fail on either count cannot develop a strong stock market, f orcing firms to rely on internal financing or bank financing-both of which have important shortcomings. This Article explains why these two investor p rotection issues are critical, related, and hard to solve, and discusses wh ich laws and institutions are most important for each. This paper is a shor ter version of The Legal and Industrial Preconditions for Strong Securities Markets, 48 UCLA L. Rev. (forthcoming 2000), available from Social Science Research Network at <http://papers.ssm.com/paper.taf?abstract_id = 182169> .