Ascertaining which enforcement mechanisms work to protect investors has been both a focus of recent work in academic
finance and an issue for policy-making at international development agencies. According to recent academic work, private
enforcement of investor protection via both disclosure and private liability rules goes hand in hand with financial market
development, but public enforcement fails to correlate with financial development and, hence, is unlikely to facilitate it. Our
results confirm the disclosure result but reverse the results on both liability standards and public enforcement. We use securities
regulators’ resources to proxy for regulatory intensity of the securities regulator. When we do, financial depth regularly,
significantly, and robustly correlates with stronger public enforcement. In horse races between these resource-based measures
of public enforcement intensity and the most common measures of private enforcement, public enforcement is overall as
important as disclosure in explaining financial market outcomes around the world and more important than private liability
rules. Hence, policymakers who reject public enforcement as useful for financial market development are ignoring the best
currently-available evidence.