Stock return, risk, and legal environment around the world

Wan Jiun Paul Chiou, Alice C. Lee, Cheng Few Lee

Research output: Contribution to journalArticlepeer-review

42 Scopus citations


This paper investigates how the legal environment in a country influences performance and risk of stock across countries at different developmental stages and of various rules of jurisdiction. Using data of 4916 stocks from 37 countries, our empirical findings confirm that equities in countries with English common law origin have higher risk premiums than those in civil law countries, particularly for countries of the French/Spanish code. The indicators representing high efficiency in law system, low corruption, strong legal protection of investors' rights, and reliable political environment are associated with low risk and high performance. The various elements of legal procedural formalism, however, have differing effects on volatility and return.

Original languageEnglish (US)
Pages (from-to)95-105
Number of pages11
JournalInternational Review of Economics and Finance
Issue number1
StatePublished - Jan 2010

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Generalized method of moments
  • International equity markets
  • Legal environment


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