Research Discussion Papers, Bank of Finland
Timo Korkeamäki, Elina Rainio and Tuomas Takalo
Law and stock markets: evidence from an emerging market
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.
Keywords: corporate governance; investor protection; law and finance; transparency; Sarbanes-Oxley Act; (follow links to similar papers)
JEL-Codes: G34; K22; (follow links to similar papers)
34 pages, January 10, 2010
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- This paper is published as:
Korkeamäki, Timo, Elina Rainio and Tuomas Takalo, (2013), 'Law and stock markets: evidence from an emerging market', Economics of Transition, Vol. 21, July, No. 3, pages 509-551
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