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Investor Protection: Origins, Consequences, Reform

Author

Listed:
  • 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.

Suggested Citation

  • Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection: Origins, Consequences, Reform," Harvard Institute of Economic Research Working Papers 1883, Harvard - Institute of Economic Research.
  • Handle: RePEc:fth:harver:1883
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    References listed on IDEAS

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