To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation

Posted: 9 Apr 2004

See all articles by Art Durnev

Art Durnev

University of Iowa - Henry B. Tippie College of Business

E. Han Kim

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 3 versions of this paper

Abstract

Data on corporate governance and disclosure practices reveal wide within-country variation that decreases with the strength of investors' legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data in 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices and that firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor-friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.

Keywords: Corporate Governance, Investment Opportunities, External Financing, Ownership, Legal Environment, Valuation

JEL Classification: G32, K23

Suggested Citation

Durnev, Artyom and Kim, E. Han, To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation. Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=527804

Artyom Durnev (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

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E. Han Kim

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
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734-763-3117 (Fax)

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