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Law or Finance: Evidence from Finland


  • Ari Hyytinen


  • Iikka Kuosa


  • Tuomas Takalo



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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Suggested Citation

  • Ari Hyytinen & Iikka Kuosa & Tuomas Takalo, 2003. "Law or Finance: Evidence from Finland," European Journal of Law and Economics, Springer, vol. 16(1), pages 59-89, July.
  • Handle: RePEc:kap:ejlwec:v:16:y:2003:i:1:p:59-89 DOI: 10.1023/A:1023932325783

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    References listed on IDEAS

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    More about this item


    corporate finance; financial intermediation; corporate governance;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill


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