تحقیقات مالی اسلامی (پیوسته) (Apr 2015)
The Effect of Protecting Minority Investors on the Capital Market Value in Selected Countries by Using Panel Data Analysis; Corrective Recommendations for Iran's Laws and Regulations
Abstract
Corporation as a legal entity is distinct from its founders. This separation enables a business to either flourish or fail separately from the personal assets and interests of its members (whether owners, directors or employees). The advantages of untying a business from its founders are such that the corporation has today become the most common form of commercial entity around the world. But the separation also creates risks. Without a proper structure and allocation of duties and rights, and without clarity in decision-making processes, corporations can quickly become incapable of generating any wealth. Without adequate safeguards, corporations can become vulnerable to abuse, with insiders using corporate assets for personal gain to the detriment of other stakeholders. If such abuses become widespread in an economy, they can deter investors from participating in any corporation. The quality of the rules and regulations governing corporations is therefore fundamental to functioning markets and wealth-generating economic activity. In this study, we answer the following question: Does improving the protection of minority shareholders affect the value of capital markets in different countries? To answer this question, by using data from the World Bank shareholder protection index, we estimate the effect of protecting minority shareholders on the size of capital market in 27 countries (upper middle income countries, including Iran) for 2006 to 2012. The results show that the legal protection of minority shareholders has positive effect on the capital markets.
