Law or finance: evidence from Finland

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Title: Law or finance: evidence from Finland
Author: Hyytinen, Ari ; Kuosa, Iikka ; Takalo, Tuomas
Organization: Suomen Pankki
Series: Suomen Pankin keskustelualoitteita; Bank of Finland. Discussion papers
Series number: 8/2002
Year of publication: 2002
Publication date: 22.5.2002
Published in: Published in European Journal of Law and Economics, 16, 2003: 59-89
Pages: 57 s.
Keywords: yritykset; Suomi; rahoitusmarkkinat; rahoitus; lainsäädäntö; sijoittajansuoja; velkojansuoja
JEL: E50; G24; G32
Abstract: Although it is widely acknowledged that the benefits of corporate governance reform could be substantial, systematic evidence on such reforms is scant.We both document and evaluate a contemporary corporate governance reform by constructing 18 measures of shareholder and creditor protection for Finland for the period 1980-2000.The measures reveal that shareholder protection has been strengthened whereas creditor protection has been weakened.We also demonstrate how the reform is consistent with a reorganisation of the Finnish financial market in which a bank-centred financial system shifted from relationship-based debt finance towards increasing dominance by the stock market.We find evidence that the development of shareholder protection has been a driver of the reorganisation, whereas the changes in creditor protection have mirrored market developments. Key words: corporate finance, financial intermediation, corporate governance JEL classification numbers: E50, G2 1, G24, G32

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