The great expropriation: Interpreting the innovation of "permanent capital" at the Dutch East India Company

Abstract

With cross-sectional and historical evidence indicating that financial development is an essential precursor to economic development (e.g., Sylla 2002; Siegel and Roe 2009), there is much interest in understanding what supports or predicts financial development. Among other factors, financial development appears linked to strong and stable private property rights, in particular legal protection of minority investors (La Porta et al. 1997, 2000): the more investors feel that they have some level of recourse against expropriation by managers or large shareholders of corporations, the more they are willing to invest.