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| Author: | Atanasov, V. (et al.) |
| Title: | How does law affect finance? An examination of equity tunneling in Bulgaria |
| Journal: | Journal of Financial Economics
2010 : APR, VOL. 96:1, p. 155-173 |
| Index terms: | finance securities law equities emerging markets Bulgaria models |
| Language: | eng |
| Abstract: | This study models and tests the mechanisms through which law affects tunneling (here as: tnlg.) and tnlg. affects firm valuation. In 2002, Bulgaria adopted legal changes limiting equity tnlg. through dilutive equity (here as: eqt.) offerings and freezeouts. Following the changes, minority shareholders participate equally in eqt. offerings, freezeout offer price ratios quadruple, and Tobin's q rises sharply for firms at high risk of tnlg. It is shown the importance of legal rules in limiting eqt. tnlg., the role of eqt. tnlg. risk as a factor in determining eqt. prices, and substitution by controlling shareholders btw. different forms of tnlg. |
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