Law and stock markets : evidence from an emerging market
Korkeamäki, Timo; Rainio, Elina; Takalo, Tuomas (01.01.2010)
JulkaisusarjaBank of Finland Research Discussion Papers
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-20140807416
A sweeping and protracted reform of corporate law took place in Finland in the 1970s. The reform brought significant improvements to investor protection and, similar to the US Sarbanes-Oxley Act, tightened disclosure rules at the cost of increasing the work load in corporate reporting. We find that the Finnish stock market generally reacts negatively to news of tightened disclosure rules and increased work loads, whereas news of delays in implementation of reform were largely positive. This raises the question of whether strengthening investor protection by requiring greater transparency necessarily promotes the development of financial markets. It also serves to remind that the implementation costs of reforms should not be overlooked.
Published in Economics of Transition, Volume 21(3) 2013, 509-551 http://dx.doi.org/10.1111/ecot.12020