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Can Stock Market Liberalization In Emerging Economies Mitigate Legal Systems Deficiencies?

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  • Wi Saeng Kim
  • Esmeralda Lyn
  • Edward J. Zychowicz

Abstract

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.

Suggested Citation

  • Wi Saeng Kim & Esmeralda Lyn & Edward J. Zychowicz, 2005. "Can Stock Market Liberalization In Emerging Economies Mitigate Legal Systems Deficiencies?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(3), pages 421-437, September.
    • Handle: RePEc:bla:jfnres:v:28:y:2005:i:3:p:421-437
    DOI: 10.1111/j.1475-6803.2005.00132.x
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    References listed on IDEAS

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    1. Federico Bonaglia & Jorge Braga de Macedo & Maurizio Bussolo, 2009. "How Globalisation Improves Governance," Chapters, in: Linda Yueh (ed.), The Law and Economics of Globalisation, chapter 7, Edward Elgar Publishing.
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    Cited by:

    1. Aggarwal, Raj & Goodell, John W., 2009. "Markets versus institutions in developing countries: National attributes as determinants," Emerging Markets Review, Elsevier, vol. 10(1), pages 51-66, March.
    2. Narjess Boubakri & Jean‐Claude Cosset & Houcem Smaoui, 2009. "Does Privatization Foster Changes In The Quality Of Legal Institutions?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 32(2), pages 169-197, June.
    3. Jia, Qiaoyu & Zhou, Jia'nan, 2021. "The dark side of stock market liberalization: Perspectives from corporate R&D activities in China," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

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