How does law affect finance? An examination of equity tunneling in Bulgaria

• 成果类型: Article
• 署名作者: Atanasov, Vladimir; Black, Bernard; Ciccotello, Conrad; Gyoshev, Stanley
• 署名单位: William & Mary; University of Texas System; University of Texas Austin; University System of Georgia; Georgia State University; University of Exeter
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2009.12.005
• 发表日期: 2010
• 页码: 155-173
• 关键词: Equity tunneling; Preemptive rights; Dilution; Freezeout; Controlling shareholder; Securities law; Emerging markets

摘要

We model and test the mechanisms through which law affects tunneling and tunneling affects firm valuation. In 2002, Bulgaria adopted legal changes which limit equity tunneling through dilutive equity offerings and freezeouts. Following the changes, minority shareholders participate equally in equity offerings, where before they Suffered severe dilution; freezeout offer price ratios quadruple; and Tobin's q rises sharply for firms at high risk of tunneling. The paper shows the importance of legal rules in limiting equity tunneling, the role of equity tunneling risk as a factor in determining equity prices, and substitution by controlling shareholders between different forms of tunneling. (C) 2009 Elsevier B.V. All rights reserved.