Thursday, January 28, 2016

State Capacity, Minority Shareholder Protections, and Stock Market Development

GUILLEN Mauro F., CAPRON Laurence
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Administrative Science Quarterly  61, 1 (2016) 125-160

The authors investigate how state capacity—the administrative ability to formulate and implement policy—affects the institutional adoption of new policies and the decoupling of those policies from their original purpose in the face of pressures from professions, multilateral agencies, and imitation among countries.
They expect state capacity to reduce the effect of professional and imitation influences, to increase the impact of coercive effects by multilateral agencies, and to lessen decoupling between policies’ adoption and desired outcomes. These predictions were tested using a unique longitudinal dataset on the adoption of minority shareholders’ legal protections and the development of the stock market in 78 countries between 1970 and 2011. The authors found evidence consistent with the moderating effects of state capacity on institutional adoption and on lessening policy–practice decoupling. The findings suggest that the strength of state capacity influences which policy models policymakers select and adopt, whether they implement them effectively, and what the consequences of such adoption are.