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The impact of investor protection law on corporate policy and performance: Evidence from the blue sky laws

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  • Agrawal, Ashwini K.
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    Abstract

    Recent studies have debated the impact of investor protection law on corporate behavior and value. I exploit the staggered passage of state securities fraud statutes (“blue sky laws”) in the United States to estimate the causal effects of investor protection law on firm financing decisions and investment activity. The statutes induce firms to increase dividends, issue equity, and grow in size. The laws also facilitate improvements in operating performance and market valuations. Overall, the evidence is strongly supportive of theoretical models that predict investor protection law has a significant impact on corporate policy and performance.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X12001845
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 107 (2013)
    Issue (Month): 2 ()
    Pages: 417-435

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    Handle: RePEc:eee:jfinec:v:107:y:2013:i:2:p:417-435

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate governance; Corporate finance; Investor protection; Legal environment; Law and economics;

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    Cited by:
    1. Chan, Lilian H. & Chen, Kevin C.W. & Chen, Tai-Yuan, 2013. "The effects of firm-initiated clawback provisions on bank loan contracting," Journal of Financial Economics, Elsevier, vol. 110(3), pages 659-679.

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