Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/187612 
Year of Publication: 
2009
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 2 [Issue:] 1 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2009 [Pages:] 123-145
Publisher: 
Elsevier, Amsterdam
Abstract: 
We develop a model to illustrate that controlling shareholders choose the level of investor protection that maximizes their own interests. Controlling shareholders in companies with complicated control structures can easily extract private benefits and are thus reluctant to enhance investor protection which would necessitate increased transparency. In contrast, controlling shareholders in companies with valuable growth opportunities are willing to improve investor protection so that they can benefit from the increased value resulting from the lower cost of capital. We test this prediction using firm-level data in China. The results show that the level of investor protection increases with decreases in control structure opacity and increases in growth opportunities. The correlation is more significant for enforcement than for the mechanisms of investor protection.
Subjects: 
Private benefits of control
Growth opportunities
Investor protection
JEL: 
G30
K22
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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