Informal institutions and firm valuation

Christopher Hartwell and Anna Malinowska

Emerging Markets Review, 2019, vol. 40, issue C, -

Abstract: Research on the effects of the institutional environment on firm market valuation have concentrated on formal institutions and in particular legal frameworks. However, changes in formal institutions may have little to no effect on the deeply ingrained socio-economic processes which determine the way of conducting business in a country. In such a situation, informal institutions may play a much more important role for firms. Using property rights as an example, this paper models the impact of formal and informal institutional changes on the market growth potential of Polish firms. Our examination indicates that Poland's formal and informal institutions diverge significantly, with changes in informal institutions shaping market worth much more than binding formal frameworks. We conclude that firm valuation in an unstable institutional environment is due mostly to developments in informal property rights and other factors external to the firm, with comparatively little effect of firm-specific attributes.

Keywords: Informal institutions; Firm valuation; Property rights; Emerging markets; Poland (search for similar items in EconPapers)
JEL-codes: G32 O16 P34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:40:y:2019:i:c:9

DOI: 10.1016/j.ememar.2019.03.001

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