| Corporate governance is a hot topic since the corporate came into existence. In different times, scholars have different opinions on those issues like the origins of firms and how to govern corporate. As a result, the governance models and governance mechanism differ around the world. However, due to the globalization of world economy and the intergrity of financial markets, there is tendency of convergence in corporate governance around the world since 1980th. Legal environment and securities market are viewed as important ways to moblize and absorb capital, improve the quality of corporate governance. Because of those changes, an important issue in corporate governance reform around the world is how to borrow more ideas and find better institutions to improve corporate governance from the other countries. In theoretical research, LLSV and some other scholars argue that a important problem in corporate governance is to solve the interest conflict between the control shareholder and the minor shareholders. To achieve that objective, legal environment is critical to the development of capital market, the improvement of investors'confidence, which is of great important to the allocation of capital. Through that channel, legal institutions matter for the improvement of corporate governance and the development of economy, which is important for the economy growth in the long term. In China, the capital market is developing quickly since the establishment of securities markets in early 1990s. A great number of companies have achieved the growth ability in the long run through raising money from the securities market and improving the corporate governance qualily. Due to that change, the listed companies have been gradually becoming the most important part to the economy development of our country and different regions. Meanwhile, stock investment is becoming a regular and important invest channel for the public and is gaining more and more attention. However, the protection of the interests of minor investor by the legal system is still weak, which has negative effects on the improvement of corporate governance and stock market participation. Under this situation, the stuey on the effects of legal environment on stock market participation and corporate governance has important theoretical and pratical significance.This dissertation is divided into eight sections. The first section is on the basic ideas, the research methods and the possible innovative points. The second section is the literature review on those researches from the prospectives of"law and economics"and "law and finance". In the third section, this article attempts to establish an analythetical framework to discuss the diffecences and the changes of insider and outsider governance models, the relationship between the individual and corporate and the development of the securities markets and corporage governance reform in China. The fourth and fifth sections study the effects of legal environment on stock market participation. In these two parts, this article calculated the participation rate and analysed the effect of legal environment empirically. The sixth and seventh sections are about the effects of legal environment on listed companies by employing an imperfect game model between outside investor and the listed companies. According to the results drawing from the model, this article analysed the effects of book law and law enforcement on corporate governance empirically. The final part is about the results and policy implications.This dissertation is an interdisciplinary research of law and finance, which aims at analysising the effects of legal environment on the stock market participation and listed companies'governance. The innovations can be listed as follows:â‘ Following LLSV's model, this dissertation analysed the effects of legal environment on listed companies'governance by establishing a game theory model and tested the main conclusions empirically by employing the cross-section international datas and panal datas of 30 regions in China. The results show that the improvement of written law and law enforcement has positive effects on the corporate governance, and the written law and law enforcement regulating the development of securities markets and corporate governance should be improved in China.â‘¡This dissertation draw a comparative study on the stock market participation difference across the world and studied the effects of legal environment and shareholder structure on the stock market participation empirically by employing 27samples. The results showed that the stock market participation rates in developed countries and regions are higher than those in developing ones overally, and, both legal environment and shareholder structure have significant effects on stock market participation.â‘¢This dissertation measured the stock market participation rate in different time and different regions in China by employing the datas of the individual investors and tested the effects of two kinds of law enforcement,which are called as the enforcement taking the courts as centre and the law enforcement taking regulatory instutition as centre, on stock market participation. The results showed that the stock market participation is relatively low but is developing very quickly. And, there are great regional differences in stock market participation, the participation decisions of individual investors are driven by the market expectation and their reactions are lagged behind the market most of the time. Then, this dissertation tested the effects of law enforcement on the stock market participation rate by employing the panal regional datas, which showed that the effects of the two different kinds of law encorcement mentioned above are greatly different. As a conclusion, the research of this dissertation enriched and deepened related researches theoretically and empirically, and the main results have important policy implications to the further reform of securities markets and corporate governance in China.
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