The Political Economy of Investor Protection

46 Pages Posted: 4 Jan 2007

Date Written: December 2006


Why do some countries suffer from backward financial institutions and weak corporate governance rules? We show that, even if, overall, the economy would benefit corporate governance reforms, not all the agents would stand to gain from the improvement. In particular, entrepreneurs and firms that are already well-established fear better rules, which would allow the financing of new firms and enhance competition. As a consequence, industry incumbents will try to influence the political process to block the reforms. If national political institutions are weak, these efforts are likely be successful.

Keywords: Corporate Governance, Entry, Financial Development, Investor Protection, Politics

JEL Classification: G30, G38, K22, K42, L11, O16, P16

Suggested Citation

Tommasino, Pietro, The Political Economy of Investor Protection (December 2006). Bank of Italy Economic Research Paper No. 604. Available at SSRN: or

Pietro Tommasino (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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