Edited by Stephen M. Bainbridge
Chapter 16: The regulation of insider trading in China: law and enforcement
What explains the differing pace of financial development and economic growth across nations? Beginning in the late 1990s, four financial economists – Professor Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert Vishny (known collectively as ‘LLSV’) – offered the so-called ‘legal origins’ theory, arguing in a series of studies that the legal regime for effective investor protection is a prime factor in shaping financial development. This line of research has generated much controversy. One of the main criticisms levelled at it is that it focuses too much on the law on paper with little regard to its enforcement. The lack of consensus in the debate is mainly attributable to the lack of accurate information and in particular, empirical data. Most of the research surrounding the debate has indeed been drawn from advanced economies, such as the USA and the UK, and, to a lesser extent, from some developing countries such as India where English is a widely used language and there is thus relatively easy access to relevant information. In contrast, much less research has been done on China, despite the fact that it is now the world’s second largest economy with the fastest growth rate. This is mainly because of considerable difficulties involved in data collection in relation to the subject matter.
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