Investor Protection and Interest Group Politics
AbstractWe model how three groups--insiders in existing public companies, institutional investors, and entrepreneurs planning to take firms public--compete for influence over politicians setting the level of investor protection. We identify factors that push toward suboptimal investor protection, including corporate insiders' ability to use public firms' assets to influence politicians, and institutional investors' inability to capture fully the value of investor protection for outside investors. Entrepreneurs and public firms' interest in raising equity capital does not fully eliminate the distortions arising from insiders seeking to extract rents from capital in place. Our analysis produces many testable predictions concerning how investor protection varies over time and around the world. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 23 (2010)
Issue (Month): 3 (March)
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Other versions of this item:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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