Investor Protection, Ownership, and the Cost of Capital
Investor Protection, Ownership, and the Cost of Capital:

Himmelberg, Hubbard, and Love combine the agency theory of the firm with risk diversification incentives for insiders. Principal-agent problems between insiders and outsiders force insiders to retain a larger share in their firm than they would under a perfect risk diversification strategy. The auth...

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Bibliographische Detailangaben
1. Verfasser: Love, Inessa (VerfasserIn)
Format: Elektronisch E-Book
Sprache:English
Veröffentlicht: Washington, D.C The World Bank 2002
Schlagworte:
Capital Investment
Capital Stock
Contract
Debt Markets
Economic Theory and Research
Emerging Markets
Equity
Equity Stakes
Finance
Finance and Financial Sector Development
Financial Development
Financial Literacy
Holding
Investment
Investment Decisions
Investment and Investment Climate
Investor
Investor Protection
Labor Policies
Macroeconomics and Economic Growth
Microfinance
Political Economy
Private Sector Development
Social Protections and Labor
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Zusammenfassung:Himmelberg, Hubbard, and Love combine the agency theory of the firm with risk diversification incentives for insiders. Principal-agent problems between insiders and outsiders force insiders to retain a larger share in their firm than they would under a perfect risk diversification strategy. The authors predict that this higher share of insider ownership and the resulting exposure of insiders to higher idiosyncratic risk will result in underinvestment and higher cost of capital. Using firm-level data from 38 countries, the authors provide evidence in support of their theoretical model, showing that the premium for bearing idiosyncratic risk varies between zero and six percent and decreases in the level of outside investor protection. The results of the study imply that policies aimed at strengthening investor protection laws and their enforcement will improve capital allocation and result in higher growth. This paper—a product of Finance, Development Research Group—is part of a larger effort in the group to study corporate governance and access to finance. The authors may be contacted at cph15@columbia.edu or ilove@worldbank.org
Beschreibung:1 Online-Ressource (1 online resource (56 p.))
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