Politics, Investor Protection and Competition
ECGI - Finance Working Paper No. 162/2007
Tinbergen Institute Discussion Paper No. 07-006/2
42 Pages Posted: 20 Jan 2007
Date Written: January 2007
Abstract
External finance is critical for less established entrepreneurs, so poor investor protection can hinder competition. We model how lobbying by incumbents may reduce access to finance in countries where politicians are less accountable to voters. In a broad cross-section of countries and industries, we find that (i) the number of producers and entry rates are positively correlated with investor protection in financially dependent sectors, and (ii) countries with more accountable political institutions have better investor protection.
Keywords: Financial Development, Investor protection, Competition, Lobbying, Entry, Cost of Entry
JEL Classification: G21, G28, G32
Suggested Citation: Suggested Citation
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