Derivative Actions in China: Path Dependence Revisited Notes

Abstract

The path dependence approach, developed by economists, has begun to be used by political scientists and legal scholars in different areas. The present writer has also adopted this approach to explain problems of legal transplantation of the derivative action in Japan and South Korea. In this note China is chosen to determine whether transplantation of the derivative action can equally be illuminated by the path dependence approach. If the path dependence approach is successful with respect to China, our understanding will be enhanced with respect to the transplantation of more general legal or political institutions. This note also examines the failure to use the derivative action brought by minority shareholders in listed companies in China, even though minority stockholders in limited liability companies or private companies in China are relatively active in using the institution.