Abstract

http://ssrn.com/abstract=637303
 
 

References (75)



 
 

Citations (24)



 


 



Agency Conflicts, Investment, and Asset Pricing


Rui A. Albuquerque


Boston University - School of Management; Católica-Lisbon School of Business and Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Neng Wang


Columbia Business School - Finance and Economics

October 10, 2011

Journal of Finance, Vol. 63, 2008

Abstract:     
The separation of ownership and control allows controlling shareholders to pursue private benefits. We develop an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's q, higher return volatility, larger risk premium, and higher interest rate. Calibrating the model to the Korean economy reveals that making investor protection perfect increases the stock market's value by 22%, a gain for which outside shareholders are willing to pay 11% of their capital stock.

Number of Pages in PDF File: 71

Keywords: Asset prices, heterogeneous agents, agency, corporate governance, investor protection, volatility, overinvestment

JEL Classification: G12, G31, G32, G34

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Date posted: December 31, 2004 ; Last revised: December 28, 2014

Suggested Citation

Albuquerque, Rui A. and Wang, Neng, Agency Conflicts, Investment, and Asset Pricing (October 10, 2011). Journal of Finance, Vol. 63, 2008. Available at SSRN: http://ssrn.com/abstract=637303 or http://dx.doi.org/10.2139/ssrn.637303

Contact Information

Rui A. Albuquerque (Contact Author)
Boston University - School of Management ( email )
595 Commonwealth Avenue
Boston, MA MA 02215
United States
HOME PAGE: http://people.bu.edu/ralbuque/
Católica-Lisbon School of Business and Economics ( email )
Caminho da Palma de Cima
Lisbon, 1649-023
Portugal
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Neng Wang
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

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