Unformatted text preview: elves credibly to better investor
protection by listing their stocks in
countries with strong investor protection.
countries 25 Law and Corporate Governance Commercial legal systems of most countries
derive from a relatively few legal origins.
– English common law
– French civil law
– German civil law
– Scandinavian civil law
Thus the content of law protecting investors’
rights varies a great deal across countries
It should also be noted that the quality of law
enforcement varies a great deal across countries
26 Consequences of Law The pattern of corporate ownership and valuation
– Weak investor protection => concentrated ownership
– large shareholders can abuse smaller shareholders: Cash flow vs
control Development of capital markets
– When investors are assured of receiving fair returns on their funds,
they will be willing to pay more for securities
– Thus strong investor protection will be conducive to large capital
markets • Financial development contribute to economic growth
– It enhances savings
It channels savings toward real investments in productive capacities
It enhances the efficiency of investment allocation
27 Corporate Governance Reform Scandal weary investors around the world are
demanding corporate governance reform
It’s not just the companies’ internal governance
mechanisms that failed; auditors, r...
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This document was uploaded on 01/15/2014.
- Fall '14