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The Political Economy of Investor Protection

  • Pietro Tommasino

    ()

    (Bank of Italy)

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.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2006/2006-0604/tema_604.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 604.

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Date of creation: Dec 2006
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Handle: RePEc:bdi:wptemi:td_604_06
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