Investor Protection and Corporate Valuation

Rafael La Porta, Florencio Lopez-deSilanes, Andrei Shleifer, Robert W. Vishny

NBER Working Paper No. 7403
Issued in October 1999
NBER Program(s):   AP   CF

We present a model of the effects of legal protection of minority shareholders and of cash flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 371 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better protection of minority shareholders, and weaker evidence of the benefits of higher cash flow ownership by controlling shareholders for corporate valuation.

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Published: Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, 06.

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