Nonprofit Organizations as Investor Protection: Economic Theory and Evidence from East Asia

Abstract

Enforcement problems plague shareholder activism and investor protection efforts in many parts of the world. These problems are particularly severe in transition economies, where weaknesses in legal and market constraints are prevalent. The importance of solving this problem has led legal scholars to consider a range of partial alternative solutions to domestic enforcement regimes. For example, Bernard Black and Reinier Kraakman devised a "self-enforcing" corporate law for Russia, designed specifically to minimize resort to legal authority. John Coffee has recently emphasized the role of cross-listings on foreign stock exchanges as a mechanism by which firms in weak enforcement regimes can bond themselves to "good" corporate law-by listing on a foreign stock exchange that imposes high disclosure requirements and subjects listed firms to a stringent foreign regulatory and private enforcement regime.