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Project

The impact of government regulation and self-monitoring in capital markets;

Good investor protection is of primordial importance to ensure that investors are willing to invest in a company. This is important during the entire life of a firm and especially when the firms needs external funding, e.g. at incorporation or when going public. At incorporation, the legal requirements for firm entry guarantee a minimal level of investor protection. When firms go public, they should comply with the listing rules, which further improve shareholder protection. Moreover, firms can also voluntarily adopt additional protection mechanisms. During the life of a firm, protection against managerial misbehavior is ensured by, e.g., giving shareholders voting rights on the annual meeting. All over the world, laws on the entry of new firms, listing rules and voting rules, which are thus designed to guarantee investor protection, are currently under debate (e.g. debate on strict listing rules in China). As regulators today face similar problems as regulators in the past, I use history as a laboratory to investigate the impact of regulation. I go back to pre-World War II Belgium, which was at that time one of the leading economies in the world. I first examine the effect of the abolition of government permission to incorporate new firms (1873) and to go public (1867) (1). Next, I study the effect of the abolition of multiple voting shares (1934) (2). Finally, I investigate the voluntary adoption of protection mechanisms when legal investor protection was weak (3).
Date:1 Oct 2019 →  30 Sep 2022
Keywords:CORPORATE FINANCE, FINANCIAL HISTORY
Disciplines:Financial economics
Project type:Collaboration project