The work of the law and finance school has generated a lot of criticism. The criticisms can be categorized under three headings.
1. Empirical problems
For example, Holger Spamann, using primary legal documents, re-codes the investor protection measures of La Porta, Lopez-de-Silanes, Shleifer and Vishny and finds that none of their results hold with his more accurate measure (click here). See also work by Dam and Graff.
2. Legal origin is a proxy
Legal origin may simply be a proxy for culture, initial colonization conditions, political instability, electoral systems, society's historical decision about the role of the State, or the way in which laws were transplanted.
3. Historical evidence
See the next post for more on this.
Click here to read the response of La Porta, Lopez-de-Silanes and Shleifer to their critics.