Impact of the Corporate Law Economic Reform Program Act 1999 on initial public offering prospectus earnings forecasts

Commencing 13 March 2000, the Corporate Law Economic Reform Program Act 1999 (Cth) introduced changes to the regulation of corporate fundraising in Australia. In particular, it effected a reduction in the litigation risk associated with initial public offering prospectus disclosure. We find that the change is associated with a reduction in forecast frequency and an increase in forecast value relevance, but not with forecast error or bias. These results confirm previous findings that changes in litigation risk affect the level but not the quality of disclosure. They also suggest that the reforms' objectives of reducing fundraising costs while improving investor protection, have been achieved.

Myths and Truths: The "Law and Finance Theory" Revisited

The law and finance theory identifies two dominating legal traditions, a common law tradition inherited from England, and a civil law tradition that is going back to 19th century codifications in France, Germany and Scandinavia. Another key notion of the theory is the distinction between insiders (stakeholders, "the State") and outsiders (shareholders as well as creditors). The micro foundation of this approach is the willingness to invest. The innovative addition of the law and finance theory to these ideas lies in the way it combines them with its peculiar view on legal history. The innovative addition of the law and finance theory to these ideas lies in the way it combines them with its peculiar view on legal history. The major conclusion of this theory is that the common law system provides the best basis for financial development and economic growth, followed by Scandinavian and German origin civil law and finally French origin civil law.