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How Well Do Institutional Theories Explain Firms' Perceptions of Property Rights?

Author

Listed:
  • Meghana Ayyagari
  • Asli Demirgüc-Kunt
  • Vojislav Maksimovic

Abstract

We examine how well several institutional- and firm-level factors explain firms' perceptions of property rights protection. The institutional theories we investigate account for approximately 50% of the country-level variation, indicating that current research addresses first-order factors. Firm-level characteristics, such as legal organization and ownership structure, are comparable with institutional factors in explaining variations in property rights protection. A country's legal origin predicts property rights variation better than its religion, ethnic fractionalization, or natural endowments. However, these results are driven by the inclusion of former Socialist economies in the sample. When we exclude the former Socialist economies, legal origin explains considerably less than ethnic fractionalization does. (JEL D23, K4, C5) The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Meghana Ayyagari & Asli Demirgüc-Kunt & Vojislav Maksimovic, 2008. "How Well Do Institutional Theories Explain Firms' Perceptions of Property Rights?," The Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1833-1871, July.
    • Handle: RePEc:oup:rfinst:v:21:y:2008:i:4:p:1833-1871
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    File URL: http://hdl.handle.net/10.1093/rfs/hhl032
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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