What is it about?
Theory suggests that enforcement of securities laws is important. If securities laws are not enforced, outside investors will doubt whether they will get their money back with a fair return. So outside investors will not give their money to firms (this leads to low liquidity in capital markets) or, if they give money to firms, they will demand a higher return (this leads to a higher cost of equity). There is little literature documenting the importance of enforcing securities laws. On December 8, 2005, I was asked by the Task Force to Modernize Securities Legislation in Canada to survey the little literature that exists, and prepare a report titled "Enforcement and Its Impact on Cost of Equity and Liquidity of the Market". This paper is that report.
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Why is it important?
This is the first literature review emphasizing the importance of enforcing capital market laws.
Perspectives
This was the first time I wrote a report for a Task Force.
Professor Utpal Bhattacharya
Hong Kong University of Science and Technology
Read the Original
This page is a summary of: Enforcement and its Impact on Cost of Equity and Liquidity of the Market, SSRN Electronic Journal, January 2006, Elsevier,
DOI: 10.2139/ssrn.952698.
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