Investor Protection and Corporate Governance
Rafael La Porta
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)
Florencio Lopez de Silanes
EDHEC Business School; National Bureau of Economic Research (NBER); Tinbergen Institute
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Robert W. Vishny
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Recent research on corporate governance has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of financial markets, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, summarize the consequences of these differences, and suggest potential strategies of reform of corporate governance. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems.
Number of Pages in PDF File: 40
JEL Classification: G34working papers series
Date posted: July 27, 2000
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