Abstract

http://ssrn.com/abstract=1320966
 
 

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Expropriation Risk and Firm Growth: A Corporate Transparency Channel


Art Durnev


University of Iowa - Henry B. Tippie College of Business

Sergei M. Guriev


Sciences Po; Centre for Economic Policy Research (CEPR)

May 9, 2011


Abstract:     
We propose a new channel through which expropriation risk reduces capital allocation efficiency and decreases firm growth. We build an agency model of corporate disclosure when companies face risks of expropriation. The model predicts that in countries with insecure property rights, corporations mitigate the risk of expropriation by reducing transparency. We test this channel by employing a difference-in-difference approach. Using a panel of over 16,000 firms from 84 countries, we find that transparency of companies prone to expropriation is lower in countries with insecure property rights. The reduced transparency has an adverse effect on the efficiency of capital allocation and corporate growth.

Number of Pages in PDF File: 53

Keywords: Resource Curse, Expropriation, Politics and Finance, Corporate Transparency and Disclosure, Investment Efficiency, Industry Growth

JEL Classification: G15

working papers series





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Date posted: December 29, 2008 ; Last revised: May 11, 2011

Suggested Citation

Durnev, Art and Guriev, Sergei M., Expropriation Risk and Firm Growth: A Corporate Transparency Channel (May 9, 2011). Available at SSRN: http://ssrn.com/abstract=1320966 or http://dx.doi.org/10.2139/ssrn.1320966

Contact Information

Artyom Durnev (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)
HOME PAGE: http://www.artdurnev.com
Sergei M. Guriev
Sciences Po ( email )
27 rue Saint-Guillaume
Paris Cedex 07, 75337
France
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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