The impact of investor protection law on corporate policy and performance: Evidence from the blue sky laws

Ashwini Agrawal

Journal of Financial Economics, 2013, vol. 107, issue 2, 417-435

Abstract: Recent studies have debated the impact of investor protection law on corporate behavior and value. I exploit the staggered passage of state securities fraud statutes (“blue sky laws”) in the United States to estimate the causal effects of investor protection law on firm financing decisions and investment activity. The statutes induce firms to increase dividends, issue equity, and grow in size. The laws also facilitate improvements in operating performance and market valuations. Overall, the evidence is strongly supportive of theoretical models that predict investor protection law has a significant impact on corporate policy and performance.

Keywords: Corporate governance; Corporate finance; Investor protection; Legal environment; Law and economics (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 G34 K22 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:107:y:2013:i:2:p:417-435

DOI: 10.1016/j.jfineco.2012.08.019

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