Law and stock markets : evidence from an emerging market

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Title: Law and stock markets : evidence from an emerging market
Author: Korkeamäki, Timo ; Rainio, Elina ; Takalo, Tuomas
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 1/2010
Year of publication: 2010
Publication date: 1.1.2010
Published in: Published in Economics of Transition, Volume 21(3) 2013, 509-551
Pages: 34 s.
Keywords: Suomi; lainsäädäntö; uudistukset; vaikutukset; osakemarkkinat; taloushistoria; yritykset; avoimuus; informaatio; kustannukset; rahoitusmarkkinat; osakeyhtiölaki; tiedonantovelvollisuus; sijoittajansuoja
Abstract: 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.

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