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Investor Protection and Equity Markets

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

Daniel Wolfenzon
Columbia Business School; National Bureau of Economic Research (NBER)

October 2000

Harvard Institute of Economic Research Paper No. 1906

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.

Working Paper Series

Date posted: October 29, 2000 ; Last revised: November 26, 2003

Suggested Citation

Shleifer, Andrei and Wolfenzon, Daniel, Investor Protection and Equity Markets (October 2000). Harvard Institute of Economic Research Paper No. 1906. Available at SSRN: http://ssrn.com/abstract=245448 or doi:10.2139/ssrn.245448

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Contact Information

Andrei Shleifer (Contact Author) Harvard University - Department of Economics ( email ) Littauer Center Cambridge, MA 02138 United States 617-495-5046 (Phone) 617-496-1708 (Fax) HOME PAGE: http://www.economics.harvard.edu/~ashleife/
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States
European Corporate Governance Institute (ECGI) c/o ECARES ULB CP 114 B-1050 Brussels Belgium HOME PAGE: http://www.ecgi.org
Daniel Wolfenzon Columbia Business School ( email ) 3022 Broadway New York, NY 10027 United States 212-851-1803 (Phone)
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States