IZA DP No. 4669: Investor Protection and the Value of Shares: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in Russia
revised version published as 'Investor Protection and the Value of Shares: Evidence from Statutory Rules Governing Variations of Shareholders’ Class Rights in an Emerging Market ' in: Journal of Law, Economics, and Organization, 2013, 29(6), 1344-1383
This paper uses a quasi-experimental framework provided by recent changes in Russian corporate law to study the effect of investor protection on the value of shares. The legal change analyzed involves the empowerment of preferred (non-voting) shareholders to veto unfavorable changes in their class rights. Based on a novel hand-collected dataset of dual class stock companies in Russia and using the difference-in-difference estimator, the study finds a statistically and economically significant effect of improved protection of preferred shareholders on the value of their shares. The result is robust to several changes in the empirical specification.