Ownership, Economic Entrenchment and Allocation of Capital

Johan Eklund () and Sameeksha Desai ()

No 2008-012, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 12,000 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets. Findings support the economic entrenchment hypothesis but not the legal origins hypothesis.

Keywords: Allocation of capital; accelerator principle; ownership; functional efficiency; economic entrenchment (search for similar items in EconPapers)
JEL-codes: G32 L20 P00 (search for similar items in EconPapers)
Date: 2008-02-25
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://oweb.b67.uni-jena.de/Papers/jerp2008/wp_2008_012.pdf (application/pdf)

Related works:
Working Paper: Ownership, Economic Entrenchment and Allocation of Capital (2008)
Working Paper: Ownership, Economic Entrenchment and Allocation of Capital (2008)
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:jrp:jrpwrp:2008-012

Access Statistics for this paper

More papers in Jena Economics Research Papers from Friedrich-Schiller-University Jena
Bibliographic data for series maintained by Markus Pasche ().