Abstract

http://ssrn.com/abstract=1735067
 
 

References (65)



 
 

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Why Does the Law Matter? Investor Protection and its Effects on Investment, Finance, and Growth


R. David McLean


University of Alberta - Department of Finance and Statistical Analysis

Tianyu Zhang


City University of Hong Kong (CityUHK) - Department of Accountancy

Mengxin Zhao


University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis; University of Alberta

January 4, 2011

Journal of Finance, Forthcoming

Abstract:     
Investor protection is associated with greater investment-sensitivity to q and lower investment-sensitivity to cash flow. Finance plays a role in causing these effects; in countries with strong investor protection external finance increases more strongly with q, and declines more strongly with cash flow. We further find that q- and cash flow-sensitivities are associated with ex-post investment efficiency; investment predicts growth and profits more strongly in countries with greater q-sensitivities and lower cash flow-sensitivities. The paper’s findings are broadly consistent with the notions that investor protection laws promote accurate share prices, reduce financial constraints, and encourage efficient investment.

Number of Pages in PDF File: 64

Keywords: Investor Protection, Financial Constraints, Investment-Sensitivity, Financial Development

JEL Classification: G10, G15, G28, G38

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Date posted: January 7, 2011 ; Last revised: January 27, 2013

Suggested Citation

McLean, R. David and Zhang, Tianyu and Zhao, Mengxin, Why Does the Law Matter? Investor Protection and its Effects on Investment, Finance, and Growth (January 4, 2011). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1735067

Contact Information

R. David McLean (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
School of Business
Edmonton, Alberta T6G 2R6
Canada
780-492-8005 (Phone)
780-492-3325 (Fax)
HOME PAGE: http://business.ualberta.ca/rdmclean
Tianyu Zhang
City University of Hong Kong (CityUHK) - Department of Accountancy ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
Mengxin Zhao
University of Alberta - School of Business ( email )
2-43 Business Building
Edmonton, Alberta T6G 2C7
Canada
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

University of Alberta ( email )
Rm 238, School of Business
University of Alberta
Edmonton, Alberta T6G2C6
Canada
7802481318 (Phone)
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