Law and Equity Markets: a Simple Model
AbstractWe analyze how the law and its enforcement affect equity market equilibrium. Improvements in the legal system, while invariably associated with broader equity markets, have different effects on equity returns depending on the institutional change considered and on the degree of international stock market segmentation. The model is useful to interpret the results of recent empirical work, such as La Porta et al. (1997) and Lombardo and Pagano (1999). In particular, it can rationalize the observed cross-country pattern, whereby better institutions are associated both with broader equity markets and higher risk-adjusted returns on equity.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 25.
Date of creation: 01 Oct 1999
Date of revision: 09 Feb 2002
Publication status: Published in Corporate Governance Regimes: Convergence and Diversity, J. McCahery, P. Moerland, T. Raaijmakers and L. Renneboog eds. Oxford University Press, 2002
law; enforcement; shareholder protection; corporate governance; return on equity;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-05 (All new papers)
- NEP-FMK-2001-11-05 (Financial Markets)
- NEP-LAW-2001-11-05 (Law & Economics)
- NEP-MFD-2001-11-05 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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