Discussion Paper Details

Please find the details for DP13472 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Investor Protection and Asset Prices

Author(s): Suleyman Basak, Georgy Chabakauri and M. Deniz Yavuz

Publication Date: January 2019

Keyword(s): Asset Pricing, controlling shareholders, expropriation, investor protection and stock holdings

Programme Area(s): Financial Economics

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.

For full details and related downloads, please visit:

Bibliographic Reference

Basak, S, Chabakauri, G and Yavuz, M. 2019. 'Investor Protection and Asset Prices'. London, Centre for Economic Policy Research.