Investor Protection and Corporate Valuation
45 Pages Posted: 13 Dec 1999
Date Written: October 1999
We present a model of the effects of legal protection of minority shareholders and of cash flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 371 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better protection of minority shareholders, and weaker evidence of the benefits of higher cash flow ownership by controlling shareholders for corporate valuation.
JEL Classification: G32, G31
Suggested Citation: Suggested Citation