The Failings of Legal Centralism for Helping Stock Markets in Transition
Edward Peter Stringham
Fayetteville State University - School of Business and Economics
Peter J. Boettke
George Mason University - Department of Economics
Politicka Ekonomie, Vol. 10, No. 1, pp. 22-34, January 2006
After Czech voucher privatization many companies simply ignored the interests of their shareholders. The government has since increased the amount of regulation, but they have failed to establish significant investor confidence. This article offers some explanations of why their legal centric approach remains unlikely to create good corporate governance. Mandating that companies maximize shareholder value is easier said than done because it requires government to assess whether companies are making optimal business decisions. In former communist countries especially, government officials are ill suited to make such judgments because they lack the knowledge of how businesses should be properly run. In creased bureaucratic oversight in the Czech Republic has simply burdened markets without any notice able positive results. This article discusses how good corporate governance can only be a by pro duct of markets where managers compete for investors rather than something that can be created by law.
Number of Pages in PDF File: 13
Keywords: Czech Stock Market Transition, Regulation, Corporate Governance, Legal Centralism
JEL Classification: G1, K2, P2Accepted Paper Series
Date posted: September 10, 2010
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