Premium
Investor Protection and Corporate Valuation
Author(s) -
Porta Rafael,
LopezDeSilanes Florencio,
Shleifer Andrei,
Vishny Robert
Publication year - 2002
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/1540-6261.00457
Subject(s) - shareholder , valuation (finance) , cash flow , business , sample (material) , monetary economics , investor protection , valuation effects , financial economics , accounting , finance , economics , corporate governance , chemistry , chromatography
ABSTRACT We present a model of the effects of legal protection of minority shareholders and of cash‐flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 539 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better protection of minority shareholders and in firms with higher cash‐flow ownership by the controlling shareholder.