Our evidence suggests that corporate governance in general, and the de facto
protection of minority shareholder rights in particular, matters a great deal for
the extent of exchange rate depreciation and stock market decline in 1997}98.
Although our results do not indicate which countries are vulnerable to a loss of
con"dence, they do suggest that the extent of exchange rate and stock market
collapse in response to a loss of con"dence is a!ected by investor protection.
Corporate governance can be of "rst-order importance in determining the
extent of macroeconomic problems in crisis situations.