We thank Vijay Singal (the referee) and William T. Moore (the editor) for helpful comments. We also thank Beth Baugh for editorial assistance. Any remaining errors are our own.
CAN STOCK MARKET LIBERALIZATION IN EMERGING ECONOMIES MITIGATE LEGAL SYSTEMS DEFICIENCIES?
Article first published online: 28 JUL 2005
Journal of Financial Research
Volume 28, Issue 3, pages 421–437, September 2005
How to Cite
Kim, W. S., Lyn, E. and Zychowicz, E. J. (2005), CAN STOCK MARKET LIBERALIZATION IN EMERGING ECONOMIES MITIGATE LEGAL SYSTEMS DEFICIENCIES?. Journal of Financial Research, 28: 421–437. doi: 10.1111/j.1475-6803.2005.00132.x
- Issue published online: 28 JUL 2005
- Article first published online: 28 JUL 2005
We document positive valuation effects around the time of stock market liberalization. We find that the valuation effects are larger for countries with civil law traditions compared with countries with common law origins. Similarly, we find that countries with weaker shareholder protections exhibit greater market valuation increases compared with countries with stronger shareholder protections. The results reinforce the importance of country legal systems and of shareholder protections in determining the quality of corporate governance systems and financial market outcomes. The findings suggest that stock market liberalization may mitigate deficiencies in the existing institutional environments not supportive of effective corporate governance systems.