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The Political Economy of Investor Protection

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  • Pietro Tommasino

    (Bank of Italy)

Abstract

Why do some countries suffer from backward financial institutions and weak corporate governance rules? We show that, even if, overall, the economy would benefit corporate governance reforms, not all the agents would stand to gain from the improvement. In particular, entrepreneurs and firms that are already well-established fear better rules, which would allow the financing of new firms and enhance competition. As a consequence, industry incumbents will try to influence the political process to block the reforms. If national political institutions are weak, these efforts are likely be successful.

Suggested Citation

  • Pietro Tommasino, 2006. "The Political Economy of Investor Protection," Temi di discussione (Economic working papers) 604, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_604_06
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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2006/2006-0604/tema_604.pdf
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    References listed on IDEAS

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    Cited by:

    1. Cherif, Mondher & Dreger, Christian, 2016. "Institutional Determinants of Financial Development in MENA countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 20(3), pages 670-680.

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    More about this item

    Keywords

    Corporate Governance; Entry; Financial Development; Investor Protection; Politics;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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