Chapter 5: Enforcement Strategies in UK Corporate Governance: A Roadmap and Empirical Assessment
John Armour* INTRODUCTION A great deal of attention in the past decade and a half has been devoted to the comparison of corporate governance regimes in countries around the world, and to the role, if any, played by law in facilitating deep and liquid securities markets. However, in both the analytic and empirical scholarship, the focus has mainly been on the role played by the substantive law. This, however, risks overlooking the divide, as Roscoe Pound memorably put it, between ‘law in books’ and ‘law in action’.1 The way in which rules are enforced will clearly affect agents’ incentives to comply. The effectiveness of a regulatory regime, therefore, is a function of both substantive rules and enforcement mechanisms. Recent scholarship has begun to address enforcement-related issues. Thus the authors of well-known cross-country empirical studies of ‘law and finance’ have included enforcement-related variables in their analyses.2 Some have * I am grateful to Eilís Ferran, Howell Jackson, Reinier Kraakman, Jenny Payne, Arad Reisberg, and Federico Varese for helpful comments. I also thank participants at the conference on ‘Enforcement of Corporate Law’ at Harvard Law School in March 2007 and an EXLEGI Seminar at Oxford University in February 2008. The usual disclaimers apply. An extended version of this chapter was previously published in John Armour and Jennifer Payne (eds), Rationality in Company Law: Essays in Honor of DD Prentice (Oxford: Hart Publishing, 2009), 71–119. It is reprinted here with the permission of Hart Publishing. 1 R Pound, ‘Law in Books and...
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