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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28106
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| Title: | The Impact of Investor Protection Law on Corporate Policy: Evidence from
the Blue Sky Laws |
| Authors: | Agrawal, Ashwini |
| Issue Date: | 22-Jun-2009 |
| Series/Report no.: | FIN-09-004 |
| Abstract: | Recent studies have debated the impact of investor protection laws on
firms’ corporate policies. I exploit the passage of state investor
protection statutes (“blue sky laws”) in the U.S. in the
early 20th century to estimate the effects of investor protection law on
firm financing decisions and investment activity. Regression estimates
indicate that the passage of investor protection statutes causes firms
to pay out greater dividends, issue more equity, and grow in size. The
introduction of investor protection law is also associated with
improvements in operating performance and market valuations. Additional
analysis suggests that alternative hypotheses for the measured changes
in corporate policy and performance have limited explanatory power.
Overall, the evidence is strongly supportive of theoretical models which
predict that investor protection laws have a significant impact on firm
financing and investment policy. |
| URI: | http://hdl.handle.net/2451/28106 |
| Appears in Collections: | Finance Working Papers
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