Politics, Investor Protection and Competition

ECGI - Finance Working Paper No. 162/2007

Tinbergen Institute Discussion Paper No. 07-006/2

42 Pages Posted: 20 Jan 2007

See all articles by Enrico C. Perotti

Enrico C. Perotti

University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR); Tinbergen Institute

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: January 2007

Abstract

External finance is critical for less established entrepreneurs, so poor investor protection can hinder competition. We model how lobbying by incumbents may reduce access to finance in countries where politicians are less accountable to voters. In a broad cross-section of countries and industries, we find that (i) the number of producers and entry rates are positively correlated with investor protection in financially dependent sectors, and (ii) countries with more accountable political institutions have better investor protection.

Keywords: Financial Development, Investor protection, Competition, Lobbying, Entry, Cost of Entry

JEL Classification: G21, G28, G32

Suggested Citation

Perotti, Enrico C. and Volpin, Paolo F., Politics, Investor Protection and Competition (January 2007). ECGI - Finance Working Paper No. 162/2007, Tinbergen Institute Discussion Paper No. 07-006/2, Available at SSRN: https://ssrn.com/abstract=957783 or http://dx.doi.org/10.2139/ssrn.957783

Enrico C. Perotti (Contact Author)

University of Amsterdam - Finance Group ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands
+31 20 525 4159 (Phone)
+31 20 525 5285 (Fax)

HOME PAGE: http://www.fee.uva.nl/fm/people/pero.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Paolo F. Volpin

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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