Shareholder Protection in China from a Numerical Comparative Law Perspective

The traditional approach in legal comparative research is doctrinal rule-based. A relatively recent breakthrough has been the use of econometric techniques in comparing the extent of success in different jurisdictions with respect to, for example, protecting shareholders. The meshing of legal research and econometrics is known as ‘leximetrics’ (Lele & Siems, 2007). One of the most prominent and widely cited use of leximetrics is the seminal study by La Porta and colleagues (1997, 1998 & 2000) on the correlation between shareholder protection and financial development. The study, though highly influential, has attracted various criticisms. Subsequent studies have sought to build on the study by coming up with improved research design. For example, using a panel dataset covering a range of developed and developing countries, researchers from the Cambridge Centre for Business Research have discovered that a significant upward movement in the level of shareholder protection was made by China between 1990 and 2013 (Armour et al., 2009; Siems, 2016). It has been suggested that between the period, China experienced the ‘biggest increase in shareholder protection’ amongst 30 countries studied, and China was amongst the top performers (along with France and Russia) in shareholder protection in 2013, performing even better than the UK and the US. At the same time, the World Bank’s (2017) Protecting Minority Investors Index, which forms part of its Doing Business Reports, has recently painted a rather opposite picture, in contrast to the positive assessment by the Centre for Business Research, by putting China in the 119th position out of 190 countries which indicates a very mediocre performance. This article seeks to address the question of whether and how the two studies, both employing leximetric techniques and examining an ostensibly similar issue, can point to discrepant results.