Investor’s Guide
Protection for investors and strengthening of corporate governance: The development of capital market
Jorge Luis Rodas Lawyer
Sound institutions, well-functioning legal systems and well-implemented corporate governance are essential to attracting the general interest of investors because they provide the basis for protecting the rights of all investors and shareholders. In recent years, some analyses have been carried out evaluating the impact corporate governance has on the value and performance of entities and businesses. Law and Economics scholars have debated on the fact that financial development not only requires protection for private property rights and that there is legal certainty for contract compliance but also that investors and shareholders can be protected against the exploitation of controlling administrators and shareholders. Studies reflect a positive correlation between shareholder rights and economic development. It has been said that a legal order with well-
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defined and highly enforceable rules relating to the rights of shareholders reduces the cost of capital, especially because of the ease with which entities are able to access it. These studies help come to the conclusion that corporate governance, investor protection and institutionalism have a direct impact on the development of capital markets. As a result, several countries around the world have adopted modifications, reforms, and / or new regulations to strengthen shareholder rights. The World Bank, through the Doing Business report, measures which regulations promote economic activity and which others restrict it. This report shows quantitative indicators related to corporate standards and investor and property rights protection. Comparing these regulations and their implementation in 189 jurisdictions has created a support tool for political actors, government entities and analysts to design and implement reforms with the aim of improving the business climate. This data also helps investors when analyzing risks when
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