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Investor Protection and Equity Markets

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  • Andrei Shleifer
  • Daniel Wolfenson

Abstract

We present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders. The model incorporates elements of Becker's (1968) crime and punishment' framework into a corporate finance environment of Jensen and Meckling (1976). We examine the entrepreneur's decision and the market equilibrium. The model is consistent with a number of empirical regularities concerning the relationship between investor protection and corporate finance.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7974.

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Date of creation: Oct 2000
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Publication status: published as Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October.
Handle: RePEc:nbr:nberwo:7974

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  1. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, American Finance Association, vol. 52(2), pages 737-83, June.
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  8. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1788, Harvard - Institute of Economic Research.
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