Empirical Analysis of Legal Institutions and Institutional Change: Multiple-Methods Approaches and Their Application to Corporate Governance Research

John Buchanan,Dominic H Chai,Simon Deakin

doi:10.2139/ssrn.2394681

John Buchanan, Dominic H Chai + Show 1 more

Open Access

https://doi.org/10.2139/ssrn.2394681

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Abstract

The claim that institutions matter for economic growth and development has so far received a more extensive theoretical treatment than an empirical or methodological one. Basing our approach on a coevolutionary conception of relations between law and the economy, we link theory to method and explore three techniques for analysing legal institutions empirically: ‘leximetric’ measurement of legal rules, time-series econometrics, and interview-based fieldwork. We argue that while robust measurement of institutions is possible, quantitative techniques have their limits, and should be combined with fieldwork in a multiple-methods approach.

Highlights

As a result of the flowering of institutional research in the past three decades, associated with the rise of new institutional economics and with developments in related interdisciplinary fields including the economics of law, there is considerable agreement among social scientists on the nature of institutions and on their potential to shape economic and social outcomes
We argue for an ontological perspective that sees legal institutions as endogenous to their context, and as more than an expression of behavioural phenomena; rather, they shape behaviour and thereby operate, potentially at least, as independent causal variables, capable of affecting economic outcomes
A narrow if popular definition of ‘corporate governance’ is that it is concerned with the ‘ways in which suppliers of finance to corporations assure themselves of getting a return on their investments’ (Shleifer and Vishny, 1997: 737)

Summary

Introduction

As a result of the flowering of institutional research in the past three decades, associated with the rise of new institutional economics and with developments in related interdisciplinary fields including the economics of law, there is considerable agreement among social scientists on the nature of institutions and on their potential to shape economic and social outcomes. The following propositions command broad assent: institutions are systems of norms or rules that set prescriptive standards for behaviour (Greif, 2006; Hodgson, 2006; North, 1990); they are characterised by varying degrees of formality, ranging from formal legal rules at one extreme to social norms and conventions at the other (Ostrom, 2005); they are functional, by virtue of reducing transaction. These tendencies towards theoretical refinement and synthesis notwithstanding, there is a gap in the literature on institutions that threatens to derail the wider project.

Theorising the role of law in corporate governance

Combining quantitative analysis with interview-based fieldwork

Findings

Conclusions