The Value of Judicial Independence: Evidence from Eighteenth Century England

This article assesses the impact of changes in judicial independenceon equity markets. North and Weingast (1989) argue that judicialindependence and other institutional changes inaugurated bythe Glorious Revolution of 1688–89 improved public andprivate finance in England by putting restraints on the government.We calculate abnormal equity returns at critical points in thepassage of statutes giving judges greater security of tenureand higher salaries. Early-eighteenth-century legislation grantingtenure during good behavior is associated with large and statisticallysignificant positive abnormal returns. Other statutes had positivebut generally insignificant effects.