Law in Finance

Abstract

Law’s relevance to is by now well recognized, no small part due to literature on and finance (La Porta et al. 1998; La Porta, Lopez-de-Silanes, and Shleifer 2008) celebrated this journal ten years ago under heading the new comparative economics (Djankov et al. 2003). There will always be some debate as to whether a specific law or regulation distorts or supports markets, but few would argue today that law is irrelevant to financial markets or that they could operate entirely outside it. This special issue takes debate about relation between law and a step further by proposing that law is more central to contemporary than acknowledged existing literatures: It lends authority to public and private financial instruments or means of pay; delegates power to different regulators, public or private; and vindicates financial products rooted private contracts if they are generally consistent with law. The relevance of law to has arguably increased with shift from relational to entity and ultimately market-based finance: The fungibility of financial instruments anonymous markets depends on credible contractual commitments that are enforceable a court of law without prior investigation into creditworthiness of borrower, originator or intermediary. In short, law is not just an add-on to but is in finance.