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

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dc.contributor.authorHimmelberg, Charles P.
dc.contributor.authorHubbard, R. Glenn
dc.contributor.authorLove, Inessa
dc.date.accessioned2013-06-28T13:22:17Z
dc.date.available2013-06-28T13:22:17Z
dc.date.issued2002-04
dc.description.abstractThe authors 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.en
dc.identifierhttp://documents.worldbank.org/curated/en/2002/04/1783726/investor-protection-ownership-cost-capital
dc.identifier.doi10.1596/1813-9450-2834
dc.identifier.urihttps://hdl.handle.net/10986/14288
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, D.C.
dc.relation.ispartofseriesPolicy Research Working Paper;No.2834
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectINVESTOR PROTECTION
dc.subjectOWNERSHIP
dc.subjectCOST OF CAPITAL
dc.subjectAGENCY CONCEPT
dc.subjectRISK DIVERSIFICATION
dc.subjectINCENTIVES ACCOUNTING
dc.subjectAGENCY PROBLEMS
dc.subjectBALANCE SHEET
dc.subjectBENCHMARK
dc.subjectBOOK VALUE
dc.subjectCAPITAL EXPENDITURES
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL PROJECTS
dc.subjectCD
dc.subjectCONTRACT ENFORCEMENT
dc.subjectCONTROL TRANSACTIONS
dc.subjectCORPORATE FINANCE
dc.subjectCOST OF CAPITAL
dc.subjectCOUNTRY COMPARISONS
dc.subjectDEBT
dc.subjectDEMAND CURVE
dc.subjectDIVESTITURES
dc.subjectDIVIDENDS
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC REFORMS
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEQUILIBRIUM
dc.subjectEXCISE TAXES
dc.subjectEXPECTED UTILITY
dc.subjectEXPENDITURES
dc.subjectFEDERAL RESERVE BANK OF NEW YORK
dc.subjectFINANCIAL DATA
dc.subjectFINANCIAL MARKETS
dc.subjectFIXED CAPITAL
dc.subjectFOREIGN FIRMS
dc.subjectFOREIGN INVESTORS
dc.subjectINCOME
dc.subjectINVESTOR PROTECTION
dc.subjectLAWS
dc.subjectLEGAL PROTECTION
dc.subjectLEGAL REGIMES
dc.subjectLIQUIDITY
dc.subjectMARGINAL COST
dc.subjectMARGINAL COSTS
dc.subjectMARGINAL PRODUCT
dc.subjectMARGINAL UTILITY
dc.subjectMARGINAL VALUE
dc.subjectMERGERS
dc.subjectMONETARY POLICY
dc.subjectMORAL HAZARD
dc.subjectOPPORTUNITY COST
dc.subjectOWNERSHIP STRUCTURE
dc.subjectPAYOUT
dc.subjectPENALTIES
dc.subjectPORTFOLIO
dc.subjectPREDICTIONS
dc.subjectPRICE ELASTICITY
dc.subjectPRICE ELASTICITY OF DEMAND
dc.subjectPRODUCTION FUNCTION
dc.subjectPRODUCTION TECHNOLOGY
dc.subjectPROFITABILITY
dc.subjectPROPRIETORSHIP
dc.subjectPURCHASE PRICE
dc.subjectRATIONAL EXPECTATIONS
dc.subjectREORGANIZATION
dc.subjectRESEARCH AGENDA
dc.subjectRISK AVERSION
dc.subjectRISK PREMIUM
dc.subjectSHAREHOLDERS
dc.subjectTAKEOVER
dc.subjectTOTAL FACTOR PRODUCTIVITY
dc.subjectVALUE ADDED
dc.subjectWEALTH
dc.titleInvestor Protection, Ownership, and the Cost of Capitalen
dspace.entity.typePublication
okr.crossref.titleInvestor Protection, Ownership, and the Cost of Capital
okr.date.doiregistration2025-04-10T09:28:28.672390Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2002/04/1783726/investor-protection-ownership-cost-capital
okr.globalpracticeFinance and Markets
okr.guid436491468766219543
okr.identifier.doi10.1596/1813-9450-2834
okr.identifier.externaldocumentum000094946_02051604452761
okr.identifier.internaldocumentum1783726
okr.identifier.reportWPS2834
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2002/05/30/000094946_02051604452761/Rendered/PDF/multi0page.pdfen
okr.sectorOther Finance
okr.sectorFinance
okr.topicEconomic Theory and Research
okr.topicBanks and Banking Reform
okr.topicEnvironmental Economics and Policies
okr.topicInternational Terrorism and Counterterrorism
okr.topicFinancial Crisis Management and Restructuring
okr.topicFiscal and Monetary Policy
okr.topicFinance and Financial Sector Development::Capital Markets and Capital Flows
okr.unitOff of Sr VP Dev Econ/Chief Econ (DECVP)
okr.volume1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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