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How Well Do Institutional Theories Explain Firms' Perceptions of Property Rights?

Meghana Ayyagari (), Asli Demirguc-Kunt and Vojislav Maksimovic

Review of Financial Studies, 2008, vol. 21, issue 4, 1833-1871

Abstract: We examine how well several institutional- and firm-level factors explain firms' perceptions of property rights protection. The institutional theories we investigate account for approximately 50% of the country-level variation, indicating that current research addresses first-order factors. Firm-level characteristics, such as legal organization and ownership structure, are comparable with institutional factors in explaining variations in property rights protection. A country's legal origin predicts property rights variation better than its religion, ethnic fractionalization, or natural endowments. However, these results are driven by the inclusion of former Socialist economies in the sample. When we exclude the former Socialist economies, legal origin explains considerably less than ethnic fractionalization does. (JEL D23, K4, C5) The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email:, Oxford University Press.

Date: 2008
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