Agency Conflicts, Investment, and Asset Pricing

Rui Albuquerque, Neng Wang

NBER Working Paper No. 13251
Issued in July 2007
NBER Program(s):   AP    CF    EFG    IFM

---- Abstract -----

The separation of ownership and control allows controlling shareholders to pursue private benefits. We develop an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's q, higher return volatility, larger risk premium, and higher interest rate. Calibrating the model to the Korean economy reveals that perfecting investor protection increases the stock market's value by 22 percent, a gain for which outside shareholders are willing to pay 11 percent of their capital stock.

Would you like an annual subscription to NBER Working Papers? Click here for more information.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads

Machine-readable bibliographic record - MARC, RIS, BibTeX

 

 
Publications:
Main Publications Page
 
New This Week
Working Papers
Books              
Books in Progress
Older Books Online
Digest            
Reporter            
Bulletin on Aging & Health
Historical Bulletins
Free Subscriptions
Paid Subscriptions
 
Research:
Program descriptions and members
 
Working Group Descriptions and Papers
 
Selected Projects:
Conference on Research in Income and Wealth
Conference on Econometrics and Mathematical Economics
Sloan Science and Engineering Workforce Project
Boston Census Research Data Center
 
Call for Papers
Submit to WP Series             
 
Data:
NBER Collection
Business Cycle Dates
Latest Business Cycle Memo
New Economic Releases
Selected Sources
Current Population Survey
Economic Organizations
US Government Agencies
Other Data Collections

Economic Report of the President
Economic Indicators
Congressional Budget Office
OECD Frequently Requested Statistics
 
About
What is the NBER?
NBER Historical Archives
Non-data Links    
Search              
Help              
Contact us
Site Map
Employment              
Fellowships
 
People:
Staff
Researchers
Board
Contact Us
Search
 
Search via Google: