@article{19b45fc45b8b4b2298d8c7641d147c61,
title = "How does law affect finance? An examination of equity tunneling in Bulgaria",
abstract = "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.",
keywords = "Controlling shareholder, Dilution, Emerging markets, Equity tunneling, Freezeout, Preemptive rights, Securities law",
author = "Vladimir Atanasov and Bernard Black and Conrad Ciccotello and Stanley Gyoshev",
note = "Funding Information: We would like to thank Luc Laeven (the referee) for greatly improving the paper. We are also grateful to Franklin Allen, Marco Becht, Morten Bennedsen, Erik Berglof, Mike Burkart, Petko Dimitrov, Alexander Dyck, Vladimir Gatchev, Mariassunta Gianetti, Martin Grace, Greg Hebb, Mark Hershey, Clifford Holderness, Wendy Liu, Marina Martynova, David Mauer, Chris Muscarella, Enrico Perotti, Jose Luis Peydro-Alcalde, Dimana Rankova, Andrei Shleifer, James Smith, David Stolin, Aris Stouraitis, Per Stromberg, Ajay Subramanian, Josef Zechner, and seminar participants at the American Law and Economics Association Annual Meeting (2006), Fourth Asian Corporate Governance Conference, Conference on Empirical Legal Studies (2007), European Finance Association Annual Meeting (2007), Financial System Modernization Conference organized by the European Central Bank, International Research Conference on Corporate Governance in Emerging Markets (Istanbul, 2007), European Corporate Governance Institute Conference on Corporate Governance (2008); College of William and Mary, Georgia State University, New Economic School (Moscow, Russia), Southern Methodist University, Stockholm School of Economics, University of Amsterdam, and University of Kansas for helpful comments. We are indebted to Apostol Apostolov, Roumen Nikolov, Vassil Golemanski, Vladimir Lazarov and Kamen Dikov for kindly providing firm ownership, earnings, leverage and Bulgarian Stock Exchange trade data and to Grzegorz Trojanowski for providing the Matlab code to compute oceanic Shapley Values. This project was funded in part through Grant Number S-LMAQM-00-H-0146 provided by the United State Department of State and administered by the William Davidson Institute. The opinions, findings, conclusions, and recommendations expressed herein are those of the authors and do not necessarily reflect those of the Department of State or the William Davidson Institute. ",
year = "2010",
month = apr,
doi = "10.1016/j.jfineco.2009.12.005",
language = "English (US)",
volume = "96",
pages = "155--173",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier",
number = "1",
}