The Law and Economics of Self-Dealing
Ministry of Finance; World Bank
Florencio Lopez de Silanes
EDHEC Business School; National Bureau of Economic Research (NBER); Tinbergen Institute
Rafael La Porta
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, governing a specific self-dealing transaction. This theoretically-grounded index predicts a variety of stock market outcomes, and generally works better than the commonly used index of anti-director rights.
Number of Pages in PDF File: 66
Keywords: legal protection, disclosure, stock market
JEL Classification: G3, G38, K22working papers series
Date posted: December 7, 2005
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