Data show that better creditor protection is correlated across countries with lower average stock market volatility …

This paper addresses how creditor protection affects the volatility of stock market prices. Credit protection reduces … volatility in 40 countries over the period from 1984 to 2004. Estimated probabilities of a liquidity crisis are used as a proxy … price volatility …

We find an empirical regularity that stronger creditor protection reduces the volatility of stock market prices. We … analyze two distinct mechanisms that characterize equity price volatility: government guarantees and creditor protection … credit constraints, increases stock price volatility. Empirically, accounting for the probability of financial crises, we …