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Agency Conflicts, Investment, and Asset Pricing / Rui Albuquerque, Neng Wang.
- Format:
- Book
- Author/Creator:
- Albuquerque, Rui.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w13251.
- NBER working paper series no. w13251
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2007.
- Summary:
- The separation of ownership and control allows controlling shareholders to pursue private benefits. We develop an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's q, higher return volatility, larger risk premium, and higher interest rate. Calibrating the model to the Korean economy reveals that perfecting investor protection increases the stock market's value by 22 percent, a gain for which outside shareholders are willing to pay 11 percent of their capital stock.
- Notes:
- Print version record
- July 2007.
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