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Title: Investor Protection and Equity Markets
Authors: Shleifer, Andrei
Wolfenzon, Daniel
Issue Date: 30-Oct-2001
Series/Report no.: FIN-01-054
Abstract: We present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders. The model incorporates elements of Becker’s (1968) “crime and punishment” framework into a corporate finance environment of Jensen and Meckling (1976). We examine the entrepreneur’s decision and the market equilibrium. The model is consistent with a number of empirical regularities concerning the relationship between investor protection and corporate finance. It also sheds light on the patterns of capital flows between rich and poor countries and on the politics of reform of investor protection.
URI: http://hdl.handle.net/2451/26607
Appears in Collections:Economics Working Papers

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