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Investor Protection: Origins, Consequences, Reform

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  • Rafael La Porta
  • Florencio Lopez-de-Silanes
  • Andrei Shleifer
  • Robert Vishny

Abstract

Recent research has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, discuss the possible origins of these differences, summarize their consequences, and assess potential strategies off corporate governance reform. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems.

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File URL: ftp://ftp.repec.org/RePEc/fth/harver/hier1883.pdf
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Bibliographic Info

Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1883.

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Date of creation: 1999
Date of revision:
Handle: RePEc:fth:harver:1883

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Phone: 617-495-2144
Fax: 617-495-7730
Web page: http://www.economics.harvard.edu/journals/hier
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References

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  23. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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