Investor Protection and Corporate Control

47 Pages Posted: 11 Oct 2017

See all articles by Borja Larrain

Borja Larrain

Pontificia Universidad Catolica de Chile

Matias Tapia

Instituto de Economía, Pontificia Universidad Catolica de Chile

Francisco Urzúa I.

City, University of London - Bayes Business School

Date Written: July 2017

Abstract

We argue that investor protection changes the relative importance of productivity and scale as drivers of corporate control transfers. Using a large sample of European firms we find that control transfers are more correlated with increasing profitability and less correlated with increasing size when investor protection is strong. This suggests that improving productivity is more important as a driver of acquisitions when investor protection is strong, and alleviating financial constraints or empire building are more important when investor protection is weak. Our evidence is consistent with the idea that good investor protection promotes a more productive use of corporate assets.

Suggested Citation

Larrain, Borja and Tapia, Matias and Urzua, Francisco, Investor Protection and Corporate Control (July 2017). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3051366

Borja Larrain (Contact Author)

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://economiayadministracion.uc.cl/personal/blarrain/

Matias Tapia

Instituto de Economía, Pontificia Universidad Catolica de Chile ( email )

Casilla 76
Correo 17
Santiago
Chile

Francisco Urzua

City, University of London - Bayes Business School ( email )

United Kingdom

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