Strong Financial Laws Without Strong Enforcement: Is Good Law Always Better than No Law?

Journal of Empirical Legal Studies, 2013, Vol. 10, No. 2, pp. 288-324

UNSW Australian School of Business Research Paper No. 2012 BFIN 02

54 Pages Posted: 12 Feb 2012 Last revised: 22 Apr 2013

See all articles by Mark Humphery-Jenner

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: 2013

Abstract

This paper examines whether strong laws are effective when regulatory institutions are weak. This has become especially relevant due to criticisms of financial market regulation in the US. I test the impact of imposing strong laws on a weak regulatory environment by using China’s principled reforms to market manipulation law as a natural experiment. The results from difference in difference tests suggest that China’s principled law reforms did not improve the market’s information environment, as proxied by the level of informed trade and information asymmetry. This implies that principled law reform is ineffective if the regulatory environment is weak.

Keywords: Regulation, Law Reform, Securities Law, Adverse Selection, Informed Trade, China, Securities Litigation

JEL Classification: G14, G18, H11, K22, K42

Suggested Citation

Humphery-Jenner, Mark, Strong Financial Laws Without Strong Enforcement: Is Good Law Always Better than No Law? (2013). Journal of Empirical Legal Studies, 2013, Vol. 10, No. 2, pp. 288-324, UNSW Australian School of Business Research Paper No. 2012 BFIN 02, Available at SSRN: https://ssrn.com/abstract=2003609 or http://dx.doi.org/10.2139/ssrn.2003609

Mark Humphery-Jenner (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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