Andrei Shleifer asks Is There a Major Problem with Corporate Governance in the United States?

Abstract

The distinction between civil law and common law countries comes down to the question of who has the ultimate trust of society, lawmakers (legislators) or law enforcers (judges). It is argued that common law, which puts much more trust in law enforcers and gives much greater discretion to the courts, is better placed to protect shareholders, and so fosters the development of efficient capital markets. The current tendency under Sarbanes-Oxley for more prescriptive capital market rules might be counterproductive.