1. Law and Finance in Transition Economies By: Katharina Pistor, Martin Raiser, Stanislaw Gelfer

2. Part 1: Introduction

3. Purpose of the paper To examine right of shareholders and creditors in transition economies Ability of firms to raise external finance. There has been an evolution on thinking about financial laws

4. Reasons for Protection Stock Market Development More minority positions available in businesses The reverse also holds for this

5. Corporate Sector in Trans. Economies Poor corporate governance is observed External finance is necessary Businesses are using groups to lower risks Minority shareholders and managers v. boards

6. Laws and Enforcement Distrust by economic agents Lack of resources in transition economies Enforcement is nearly as important as law

7. Laws and Enforcement Distrust by economic agents Lack of resources in transition economies Enforcement is nearly as important as law

8. Part 2: Key Problems

9. Central Planning Problems of financial discipline and problems in monitoring Government funding went away after reforms Left external investors skeptical

10. Three Big Problems Absence of external finance to replace state Entrenched incumbent managers Remaining state influence in businesses

11. Market Capitalization Progress

12. Part 3: Shareholder and Creditor Rights

13. Shareholder Rights Voting by mail Share depositing Voting rights and representation Legal action possible Ability to call meetings Minority protection rights

14. Indexes of Shareholder Rights VOICE EXIT ANTI MANAGE / ANTI BLOCK SMITEGR

15. Indexes of Creditor Rights CREDCON COLLAT REMEDY Catch up has taken place

16. Part 4: Effectiveness

17. What is Effectiveness? The problem with the indexes Compliance and punishments both needed.

18. Three More Indexes Rules of Law Index Effectiveness Index Enforcement Index

19. Some Key Findings Big differences in transition economies Lots of variation in rule of law index Correlation coefficient results

20. Part 5: Law, Legality, and Finance

21. Some Key Findings Some popular measurements EF = Const + a*law + b*legality + c*controls + u

22. Table of Results

23. Table of Results Continued...

24. Conclusion

25. Summary Radical improvements do not fix everything Book regulation is not enough Enforcement remains a critical component