Stock Market and Shareholder Protection : Are They Important for Economic Growth?

With the help of recent developments in quantitative comparative law literature this paper tries to determine the long run equilibrium relationship between shareholder protection and stock market development and ultimately their relationship with economic growth in the context of India. Within a multivariate VAR framework, Granger Causality/ Block Exogeneity Wald Tests are employed to investigate the long run causal relationship in a system consisting of stock market, legal development and economics growth. On the contrary to most of the existing literature our results only vaguely support the hypothesis that shareholder protection causes stock market development and eventually economic growth as the relationship is not consistent across alternative specifications of stock market and legal development