Investor Protection and Asset Prices

Suleyman Basak, Georgy Chabakauri and M. Deniz Yavuz

No 13472, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Empirical evidence suggests that investor protection has significant effects on ownership concentration and asset prices. We develop a dynamic asset pricing model to address the empirical regularities and uncover some of the underlying mechanisms at play. Our model features a controlling shareholder who endogenously accumulates control over a firm and diverts a fraction of its output. Better investor protection decreases stock holdings of controlling shareholders, increases stock mean-returns, and increases stock return volatilities when ownership concentration is sufficiently high, consistent with the related empirical evidence. The model also predicts that better protection increases interest rates and decreases the controlling shareholder’s leverage.

Keywords: Investor protection; Asset pricing; Controlling shareholders; Expropriation; Stock holdings (search for similar items in EconPapers)
JEL-codes: G12 G32 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-cfn and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP13472 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Investor Protection and Asset Prices (2019)
Working Paper: Investor protection and asset prices (2019)
Working Paper: Investor protection and asset prices (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13472

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13472

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().