Investor Protection and Equity Markets

33 Pages Posted: 22 Oct 2000 Last revised: 17 Apr 2022

See all articles by Andrei Shleifer

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Daniel Wolfenzon

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 6 versions of this paper

Date Written: October 2000

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.

Suggested Citation

Shleifer, Andrei and Wolfenzon, Daniel, Investor Protection and Equity Markets (October 2000). NBER Working Paper No. w7974, Available at SSRN: https://ssrn.com/abstract=246990

Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

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Daniel Wolfenzon

Columbia University - Columbia Business School, Finance ( email )

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National Bureau of Economic Research (NBER)

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