Abstract

http://ssrn.com/abstract=940665
 
 

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Phoenix Rising: Legal Reforms and Changes in Valuations in Finland During the Economic Crisis


Timo P. Korkeamaki


Hanken School of Economics - Department of Finance and Statistics

Yrjo Koskinen


The Wharton School - University of Pennsylvania

Tuomas Takalo


Hanken School of Economics - Department of Economics; Helsinki Center of Economic Research (HECER)

March 2007

Bank of Finland Research Discussion Paper No. 1/2007
Boston University School of Management Working Paper No. 2006-18

Abstract:     
Finland experienced an extremely severe economic depression in the early 1990s. As a part of the government's crisis management policies, 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.

Number of Pages in PDF File: 48

Keywords: corporate governance, bankruptcy, financial supervision, shareholder protection, creditors' rights, corporate valuations, political economy

JEL Classification: G34, K22


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Date posted: October 28, 2006 ; Last revised: October 27, 2008

Suggested Citation

Korkeamaki, Timo P. and Koskinen, Yrjo and Takalo, Tuomas, Phoenix Rising: Legal Reforms and Changes in Valuations in Finland During the Economic Crisis (March 2007). Bank of Finland Research Discussion Paper No. 1/2007; Boston University School of Management Working Paper No. 2006-18. Available at SSRN: http://ssrn.com/abstract=940665 or http://dx.doi.org/10.2139/ssrn.940665

Contact Information

Timo Korkeamaki
Hanken School of Economics - Department of Finance and Statistics ( email )
FI-00101 Helsinki
Finland
Yrjo Koskinen (Contact Author)
The Wharton School - University of Pennsylvania ( email )
Finance Department
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-1587 (Phone)

Tuomas Takalo
Hanken School of Economics - Department of Economics ( email )
PO Box 479
FI-00101 Helsinki
Finland
HOME PAGE: http://https://sites.google.com/site/tuomastakalo/
Helsinki Center of Economic Research (HECER) ( email )
FI-00014 Helsinki
Finland
HOME PAGE: http://https://sites.google.com/site/tuomastakalo/
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