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Law, Stock Markets, and Innovation
The Journal of Finance
  • James R. Brown, Iowa State University
  • Gustav Martinsson, Swedish Institute for Financial Research
  • Bruce C. Petersen, Washington University in St. Louis
Document Type
Publication Version
Accepted Manuscript
Publication Date
We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long-run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.

This is an accepted manuscript of an article from The Journal of Finance, 2013 68(4); 1517-1549. DOI: 10.1111/jofi.12040. Posted with permission.

Copyright Owner
John Wiley & Sons, Inc
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Citation Information
James R. Brown, Gustav Martinsson and Bruce C. Petersen. "Law, Stock Markets, and Innovation" The Journal of Finance Vol. 68 Iss. 4 (2013) p. 1517 - 1549
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