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Investor Protection and Corporate Value

In recent years,the investor protection problem has drawn tremendous attention from both theoretical and practical areas all over the world.Being different from the western scholars who describe the investor protection problem through the c
Submitted On: 04-05-2010 | Views:	Article Tools:

In recent years,the investor protection problem has drawn tremendous attention from both theoretical and practical areas all over the world.Being different from the western scholars who describe the investor protection problem through the comparison analysis from the level of nations and then reveal the relationship between the investor protection and corporate value,the author of this paper exploits these problems from the microcosmic level of companies.First of all,anglicizing the influence factors of internal governance mechanism in the company on all kinds of investor protections,this paper constructs an index assessment system to measure investor protection in the level of companies.This part plays an essential role in this paper.Second,we do the regression of the investor protection index,computed by the previous part,and the corporate value in order to exploit the relation between investor protection in the company level and the corporate value.The results of the regression indicate that the minority investor protection in the company level has positive effect on the corporate value.In the end,we introduce the agency cost as an intermediate variable and investigate the correlations between the agency cost and the corporate value,and between the investor protection index and the agency cost respectively.The results suggest that the agency cost has significant and negative effect on the corporate value,and that the minority protection index has significant and negative effect on the agency cost,which simultaneously enhances the relation of the investor protection index and.corporate value.Based on above,this paper concludes that there is significant difference in the investor protection among companies.In fact,the minority investor protection in the company level reduces the agency cost and hence raises the corporate value.

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