Phoenix rising: Legal reforms and changes in valuations in Finland during the economic crisis

Timo Korkeamäki (), Yrjö Koskinen () and Tuomas Takalo
Additional contact information
Timo Korkeamäki: Gonzaja University, Boston University School of Management and Bank of Finland.

No 1/2007, Research Discussion Papers from Bank of Finland

Abstract: Finland experienced an extremely severe economic depression in the early 1990s. In the midst of this crisis, significant new legislation was passed that increased supervisory powers of financial market regulators and reformed bankruptcy procedures, significantly decreasing the protection of creditors. We show that the introduction of these new laws resulted in positive abnormal stock returns. The new laws also lead to increases in firms’ Tobin’s q, especially for more levered firms. In contrast to previous studies, our results also suggest that public supervision of financial markets fosters rather than hampers financial market development.

Keywords: corporate governance; bankruptcy; financial supervision; shareholder protection; creditors’ rights; corpo-rate valuations; political economy (search for similar items in EconPapers)
JEL-codes: G34 K22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: Written
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Journal Article: Phoenix rising: Legal reforms and changes in valuations in Finland during the economic crisis (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:bofrdp:2007_001

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