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How Well do Institutional Theories Explain Firms' Perceptions of Property Rights?

47 Pages Posted: 21 Feb 2005  

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Meghana Ayyagari

George Washington University - School of Business

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Date Written: February 2005

Abstract

We examine how well several institutional and firm-level factors explain firms' perceptions of property rights protection. Our sample includes private and public firms which vary in size from very small to large in 80 countries. Together, the institutional theories we investigate account for approximately 50 percent of the country-level variation, indicating that the literature is addressing first-order factors. Firm-level characteristics, such as legal organization and ownership structure, are comparable to institutional factors in explaining variation in property rights protection. A country's legal origin predicts property rights variation better than its religion, its ethnic diversity, or natural endowments. However, these results are driven by the inclusion of former Socialist economies in the sample. When we exclude the former Socialist economies, legal origin explains considerably less than ethnic fractionalization.

Keywords: Law, Property Rights, Variance Decomposition

JEL Classification: D23, K4, C5

Suggested Citation

Maksimovic, Vojislav and Ayyagari, Meghana and Demirgüç-Kunt, Asli, How Well do Institutional Theories Explain Firms' Perceptions of Property Rights? (February 2005). World Bank Policy Research Working Paper No. 3709. Available at SSRN: https://ssrn.com/abstract=668962 or http://dx.doi.org/10.2139/ssrn.668962

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/

Meghana Ayyagari (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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