EECS 1710 Lecture Notes - Lecture 38: Public Company, Corporate Crime
24 Jun 2018
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EECS 1710 Lecture 38 Notes
Introduction
Legal Protection
An active stock market requires the trust of local investors, and increased trust leads to
more participation and trading.
Exhibit 3.6 identifies some factors that enable stronger governance and thus may
increase the trading activity in a stock market.
These factors are discussed next.
Rights Shareholders in some countries have more rights than those in other countries.
For example, shareholders have more voting power in some countries than others, and
they can have influence on a wider variety of management issues in some countries.
The legal protection of shareholders varies substantially among countries.
Shareholders in some countries may have more power to sue publicly traded firms if
their executives or directors commit financial fraud.
In general, common-law countries (e.g., Canada, the United Kingdom, and the United
States) allow for more legal protection than civil-law countries (e.g., France and Italy).
Managers are more likely to serve shareholder interests when shareholders have more
legal protection.
Government Enforcement Government enforcement of securities laws varies among
countries.
A country might have laws to protect shareholders yet not adequately enforce those
laws, which means that shareholders are not protected.
Some countries tend to have less corporate corruption than others.
In these countries, shareholders are less susceptible to major losses due to agency
problems whereby managers use shareholder money for their own benefit.
Accounting Laws
Document Summary
An active stock market requires the trust of local investors, and increased trust leads to more participation and trading. Government enforcement government enforcement of securities laws varies among countries. In these countries, shareholders are less susceptible to major losses due to agency problems whereby managers use shareholder money for their own benefit. The amount of financial information that must be provided by public companies varies among countries. Trust of local investors, and increased trust leads to more participation and trading. Exhibit 3. 6 identifies some factors that enable stronger governance and thus may increase the trading activity in a stock market. Rights shareholders in some countries have more rights than those in other countries. For example, shareholders have more voting power in some countries than others, and they can have influence on a wider variety of management issues in some countries. The legal protection of shareholders varies substantially among countries.
