Copyright (c) 2009 All rights reserved. http://works.bepress.com/florencio_lopez_de_silanes Recent documents in Florencio López de Silanes en-us Sun, 31 May 2009 05:55:21 PDT 3600 http://works.bepress.com/florencio_lopez_de_silanes/22 http://works.bepress.com/florencio_lopez_de_silanes/22 Sun, 25 May 2008 06:21:45 PDT Florencio López de Silanes http://works.bepress.com/florencio_lopez_de_silanes/21 http://works.bepress.com/florencio_lopez_de_silanes/21 Sun, 25 May 2008 06:19:43 PDT Florencio López de Silanes http://works.bepress.com/florencio_lopez_de_silanes/20 http://works.bepress.com/florencio_lopez_de_silanes/20 Fri, 02 Nov 2007 15:37:37 PDT Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/19 http://works.bepress.com/florencio_lopez_de_silanes/19 Fri, 02 Nov 2007 15:31:20 PDT Using a sample of 49 countries, we show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/18 http://works.bepress.com/florencio_lopez_de_silanes/18 Fri, 02 Nov 2007 15:12:00 PDT This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/17 http://works.bepress.com/florencio_lopez_de_silanes/17 Fri, 02 Nov 2007 15:05:43 PDT We present data on ownership structures of large corporations in 27 wealthy economies, making an effort to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to the Berle and Means image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions or other widely held corporations is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management. The results suggest that the central agency problem in large corporations around the world is that of restricting expropriation of minority shareholders by the controlling shareholders, rather than that of restricting empire building by professional managers unaccountable to shareholders. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/16 http://works.bepress.com/florencio_lopez_de_silanes/16 Fri, 02 Nov 2007 14:58:25 PDT We investigate empirically the determinants of the quality of governments in a large crosssection of countries. We assess government performance using measures of government intervention, public sector efficiency, public good provision, size of government, and political freedom. We find that countries that are poor, close to the equator, ethnolinguistically heterogeneous, use French or socialist laws, or have high proportions of Catholics or Muslims exhibit inferior government performance. We also find that the larger governments tend to be the better performing ones. The importance of historical factors in explaining the variation in government performance across countries sheds light on the economic, political, and cultural theories of institutions. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/15 http://works.bepress.com/florencio_lopez_de_silanes/15 Fri, 02 Nov 2007 14:52:40 PDT Criticisms of privatization have centered around the possibility that the observed higher profitability of privatized companies comes at the expense of the rest of society. In this paper we focus on two of the most likely channels for social losses: (1) increased prices as firms capitalize on the market power; and (2) layoffs and lower wages as firms seek to roll back generous labor contracts. Using data for all 218 non-financial privatizations that took place in Mexico between 1983 and 1991 we find that privatized firms quickly bridge the pre-privatization performance gap with industry-matched control groups. For example, privatization is followed by a 24 percentage point increase in the ratio of operating income to sales. We roughly decompose those gains in profitability as follows: 10 percent of the increase is due to higher product prices; 33 percent of the increase represents a transfer from laid-off workers; and productivity gains account for the residual 57 percent. Transfers from society to the firm are partially offset by taxes which absorb slightly over half the gains in operating income. Finally, we also find evidence indicating that deregulation is associated with faster convergence to industry benchmarks. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/14 http://works.bepress.com/florencio_lopez_de_silanes/14 Fri, 02 Nov 2007 14:45:06 PDT Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. We describe the various forms that tunnelling can take, and examine under what circumstances it is legal. We discuss two important legal principles -- the duty of care and the duty of loyalty -- which courts use to analyze cases involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodates tunnelling in civil law countries, and why certain kinds of tunnelling are less likely to pass legal scrutiny in common law countries. Florencio López de Silanes Law and Finance http://works.bepress.com/florencio_lopez_de_silanes/13 http://works.bepress.com/florencio_lopez_de_silanes/13 Fri, 02 Nov 2007 14:36:43 PDT This paper addresses the question of why firms pay dividends, the so-called "dividend puzzle," from the agency perspective. We outline two agency models of dividends. On what we call "the outcomes" model, dividends are the result of effective pressure by minority shareholders rights should be associated with higher dividends. On what we call "the substitutes" model, insiders choose to pay dividends to establish a reputation for a decent treatment of minority shareholders so that firms can raise equity finance in the future. Under this model, stronger minority shareholder rights reduce the need for establishing a reputation, and so should be associated with lower dividends. We compare these models on a cross-section of 4,000 companies from around the world, which operate in countries with different levels of investor protection, and therefore different strength of minority shareholder rights. The findings on payout levels, as well as other results, support the outcome agency model of dividends. Florencio López de Silanes Law and Finance