
Florencio Lopez-de-SilanesSKEMA Business School · Department of Finance
Florencio Lopez-de-Silanes
PhD in Economics
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117
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June 2005 - September 2010
January 2017 - January 2017
September 2005 - July 2007
Publications
Publications (117)
We propose an indicator for pro-debtor bias in Chapter 11 judicial decisions and relate it to court shopping and bankruptcy resolution. We find that pro-debtor bias is significantly higher for the so-called bootstrap shoppers who file in a district that is neither their main place of business or main assets nor the district of incorporation. In add...
Research Question/Issue
We examine the effect of multiple environmental, social, and governance (ESG) scores on institutional investor ownership of firms and investor portfolio weightings. We are also the first to analyze the three individual components of ESG rankings to estimate the relative preferences of institutional investors.
Research Findi...
The chapter analyses the use and management of the European Structural and Investment Funds, attending to the differences between the countries that carry out them to highlight possible inefficiencies. Taking the EU funds related to the Multiannual Financial Framework 2014–2020, made up by 7.162 projects, the types of funds and their distribution a...
We investigate the determinants of the effective use of European Structural and Investment Funds. We use a newly constructed database of the 1024 programmes from the last two programme periods that started in 2007 and 2014, respectively. Our results show that virtually all programmes fail to meet the initial deadline and need the extension period t...
We assemble homeowner insurance claims from 28 independently operated country subsidiaries of a multinational insurance firm. We propose a new insurance model, in which consumers can make invalid claims and firms can deny valid claims, as is common in the data. In the model, trust and honesty shape equilibrium insurance contracts, disputes, and cla...
Loan tranching allows banks to manage risk and facilitate firm financing, which may be essential for firms that cannot access investors from stock markets. We analyze the determinants and benefits of loan tranching by pooling the tranches of individual loans to create the largest cross-country sample of syndicated loans, covering more than 150,000...
The aim of this paper is to analyse the influence of financial system liquidity and corporate leverage on a firm's overinvestment. We posit that when external funds are easily available, as in expansionary monetary periods, debt loses its traditional role as a managerial control mechanism. Instead, the supply of systemic liquidity results in corpor...
We document the wide dispersion of private equity investment returns and examine performance determinants using a newly constructed database of 7,500 investments worldwide. One in 10 investments does not return any money, whereas 1 in 4 has an internal rate of return (IRR) above 50%. Quick flips are associated with the highest returns. Performance...
In the last dozen years, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. Much of this research has dealt with rules governing investor protection and their effects on finan...
We use a newly assembled sample of 1,503 regions from 82 countries to compare the speed of per capita income convergence within and across countries. Regional growth is shaped by similar factors as national growth, such as geography and human capital. Regional convergence is about 2.5% per year, not more than 1% per year faster than convergence bet...
We analyze the internal capital markets of a multinational conglomerate to determine whether more powerful unit managers enjoy larger allocations. We use a new dataset of planned and actual allocations to business units to show that, although all unit managers systematically over-budget capital expenditures, more powerful and better connected manag...
We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the US and how long it takes. About 60% of the letters were returned, taking over 6 months, on average. The results provide new objective indicators of government efficiency across countries, based on...
Using new data we analyze retrenchment programs before privatization, their effect on prices paid and re-hiring policies pursued by the new private owners. We find evidence in support of skimming and adverse selection. We find that some labor retrenchment policies have a negative impact on net privatization prices, even after taking sample selectio...
We investigate the determinants of regional development using a newly constructed database of 1,569 subnational regions from
110 countries covering 74% of the world’s surface and 97% of its GDP. We combine the cross-regional analysis of geographic,
institutional, cultural, and human capital determinants of regional development with an examination o...
Based on a newly assembled firm-level data set on corporate governance and firm performance for Mexico, we show that better firm-level corporate governance practices are linked to higher valuations, better performance and more dividends disbursed to investors. These results hold after controlling for endogeneity. Overall, the evidence shows that th...
Simeon Djankov et al. (2003) introduce a measure of the quality of contract enforcement-the formalism of civil procedure-for 109 countries as of 2000. For 40 of these countries, we compute procedural formalism every year since 1950. We find that large differences in procedural formalism between common and civil law countries existed in 1950 and wid...
Simeon Djankov et al. (2003) introduce a measure of the quality of contract enforcement -- the formalism of civil procedure -- for 109 countries as of 2000. For 40 of these countries, we compute procedural formalism every year since 1950. We find that large differences in procedural formalism between common and civil law countries existed in 1950 a...
We examine the determinants of private equity returns using a newly constructed database of 7,500 investments worldwide over forty years. The median investment IRR (PME) is 21% (1.3), gross of fees. One in ten investments goes bankrupt, whereas one in four has an IRR above 50%. Only one in eight investments is held for less than 2 years, but such i...
We collect data on the rules and practices of financial and conflict disclosure by members of Parliament in 175 countries. Although twothirds of the countries have some disclosure laws, less than one-third make disclosures available to the public, and less than one-sixth of potentially useful information is publicly available in practice, on averag...
This paper uses a newly created dataset containing the performance of 4,848 investments of 151 Private Equity (PE) firms between 1973 and 2002. This data allows us to present new results on the cross-section of private equity investments. We find that private equity investments are held on average for 4 years with only 14% of quick flips (held less...
In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to t...
Does more bargaining power of managers inside a firm lead to larger allocations of capital? To tackle this question, we use unique and proprietary panel data on planned and realized capital allocations inside a very large conglomerate. The firm operates worldwide, is headquartered in Europe and has 5 divisions and 22 business units. We measure barg...
Este documento analiza las recientes tendencias del desarrollo institucional de América Latina en relación a la protección del inversionista. A pesar del subdesarrollo de los mercados financieros de la región, hay un movimiento lento hacia reformas legales con la intención de proteger a los inversionistas y hacer que los mercados regionales sean má...
This paper analyzes recent trends of Latin America’s institutional development regarding investor protection. In spite of the underdevelopment of the region’s financial markets, there is slow movement towards legal reforms intended to protect investors and make regional markets more attractive to investors; current inadequacies in the region’s lega...
The recent wave of terrorist attacks has increased the attention paid to money laundering activities. Using several methodologies, this paper investigates empirically the determinants of money laundering and its regulation in over 80 countries by assembling a cross-country dataset on proxies for money laundering and the prevalence of feeding activi...
The objective of this paper is twofold. On one hand, we undertake an analysis of the recent evolution of capital markets and their effect on the availability of external financing in Mexico in the last two decades. On the other hand, based on a newly assembled firm-level data set on corporate governance and firm performance, we show that better fir...
Contrast this theoretical paradigm with an actual example of a securities issue from the Netherlands (Velthuyse and Schlingmann (1995)). In 1987–1988, the Dutch bank ABN Amro underwrote some bonds of Coopag Finance BV, a Dutch financial company wholly owned by Co-op AG, a diversified German firm. The bonds were guaranteed by Co-op AG. The prospectu...
We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval,...
The author examines the theoretical and empirical literature pertaining to securities laws and their enforcement by regulators and courts to establish what is known and what is yet unclear. Recent empirical research in the field has established that law matters. Mandatory disclosure requirements, insider trading laws, safeguards against self-dealin...
Over the last 20 years, Mexico redefined the role of the state in its economy through an ambitious program to liberalize trade, promote efficiency and reduce the size and scope of the state-owned sector. In Mexico, privatization led to a significant improvement in firm performance, as profitability increased 24 percentage points and converged to le...
(Disponible en idioma inglés únicamente) Durante los últimos 20 años, México ha redefinido el papel del Estado en su economía a través de un vigoroso programa de apertura del comercio, promoción de la eficiencia y reducción del tamaño y alcance del sector propiedad del Estado. La privatización condujo en México a una mejora significativa del desemp...
We examine the effect of securities laws on stock market development in 49 countries. We find little evidence that public enforcement benefits stock markets, but strong evidence that laws mandating disclosure and facilitating private enforcement through liability rules benefit stock markets. *We are grateful to the Inter-American Development Bank,...
We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for...
Recent research has documented large differences among countries in ownership concentration in publicly trade firms, in the breadth and depth of capital markets, in dividend policies, and access of firms to external finance. A common element to the explanations of these differences is how well investors, both shareholders and creditors, are protect...
We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. We find that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharpl...
We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries.
We find that the political power of the left is associated with more stringent labor regulations and more generous social
security systems, and that socialist, French, and Scandinavian legal origin countries have sharpl...
In the Anglo-American constitutional tradition, judicial checks and balances are often seen as crucial guarantees of freedom. Hayek distinguishes two ways in which the judiciary provides such checks and balances: judicial independence and constitutional review. We create a new database of constitutional rules in 71 countries that reflect these prov...
Privatization is under attack. Criticisms run from corrupt deals to abuse of market power and social welfare losses. We evaluate the empirical record on privatization, relying on recent comprehensive studies from Latin America. The paper presents four main results. First, the increased profitability of privatized firms is not explained by sample se...
Privatization is under attack. Criticisms run from corrupt deals to abuse of market power and social welfare losses. We evaluate the empirical record on privatization relying on recent comprehensive studies from Latin America. There are four main results. First, the increased profitability of privatized firms is not explained by sample selection bi...
We examine the effect of securities laws on stock market development in 49 countries. We find almost no evidence that public enforcement benefits stock markets, and strong evidence that laws facilitating private enforcement through disclosure and liability rules benefit stock markets.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...
In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for nonpayment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is sys...
In recent years, comparative economics experienced a revival, with a new focus on comparing capitalist economies. The theme of the new research is that institutions exert a profound influence on economic development. We argue that, to understand capitalist institutions, one needs to understand the basic tradeoff between the costs of disorder and th...
(Disponible en idioma inglés únicamente) Los críticos de la privatización sostienen que una reestructuración insuficiente de la fuerza laboral es una inquietud clave y que los gobiernos deberían crear mejores programas de reducción. Ponemos a prueba, empleando datos nuevos de una muestra aleatoria de 400 compañías de todo el mundo, las teorías en p...
Critics of privatization argue that poor labor force restructuring is a key concern and that governments should establish better retrenchment programs. Using new data from a random sample of 400 companies in the world, we test competing theories about the wisdom of retrenchment programs and their effect on prices paid by buyers and re-hiring polici...
A review of the evidence on judicial reform across countries shows that those seeking to improve economic performance should not focus on judicial efficiency alone but on independence as well. It also shows that the level of resources poured into the judicial system and the accessibility of the system have little impact on judicial performance. Mos...
The emerging markets crisis of 1997-1998 offers many instances of looting of firms by their controlling shareholders. Assets were transferred out of companies, profits syphoned off to escape creditors, and troubled firms in a group propped up using loan guarantees by other listed group members.
Economic theory and evidence from a variety of debt markets shed light on current reform proposals concerning emerging market debt. Debt markets, including the U.S. municipal bond market, generally function best when the rights of creditors are protected most effectively. Since current IMF reform proposals significantly emasculate creditor rights,...
In many countries, banks lend to firms controlled by the bank's owners. We examine the benefits of related lending using a newly assembled data set for Mexico. Related lending is prevalent (20 percent of commercial loans) and takes place on better terms than arm's-length lending (annual interest rates are 4 percentage points lower). Related loans a...
In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is sy...
Critics of privatization argue that poor labor force restructuring is a key concern and that governments should establish better retrenchment programs. Using new data from a random sample of 400 companies in the world, we test competing theories about the wisdom of retrenchment programs and their effect on prices paid by buyers and rehiring policie...
We present a model of the effects of legal protection of minority shareholders and of cash-flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 539 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better prote...
In recent years, comparative economics experienced a revival, with a new focus on comparing capitalist economies. The transition from socialism, the Asian financial crisis, and the European economic and political integration, have challenged our understanding of how capitalist economies and societies work. Capitalist economies differ in important w...
In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is sy...
As a result of the emerging market crises of the last decade and a large body of academic research on the influence of investor protection in the development of capital markets and economic growth, there is a growing consensus that reforming the legal infrastructure supporting business should be an important component of reforms in many developing...
We assemble data on government ownership of banks around the world. The data show that such ownership is large and pervasive, and higher in countries with low levels of per capita income, backward financial systems, interventionist and inefficient governments, and poor protection of property rights. Higher government ownership of banks in 1970 is a...
Hayek (1960) distinguishes the institutions of English freedom, which guarantee the independence of judges from political interference in the administration of justice, from those of American freedom, which allow judges to restrain law-making powers of the sovereign through constitutional review. We create a data base of constitutional rules in 71...
Hayek (1960) distinguishes the institutions of English freedom, which guarantee the independence of judges from political interference in the administration of justice, from those of American freedom, which allow judges to restrain law-making powers of the sovereign through constitutional review. We create a data base of constitutional rules in 71...
We present new data on the regulation of entry of start-up firms in 85 countries. The data cover the number of procedures,
official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are
extremely high in most countries. Countries with heavier regulation of entry have higher corruption and l...
Recent research has documented large differences among countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. A common element to the explanations of these differences is how well investors, both shareholders and creditors, are...
We present data on ownership structures of large corporations in 27 wealthy economies, making an effort to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to the Berle and Means image of ownership of the...
In cooperation with Lex Mundi member law firms in 109 countries, this paper measures and describes the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data on legal structure to construct an index of regulation of dispute resolution for each country. We find that t...
Tunneling represents the most fundamental process in physics. According to our present understanding tunneling started the universe about 13 billions years ago. Nowadays we know that tunneling is involved in radioactivity and in nuclear fusion — the latter effect is heating the sun. Tunneling is the process of molecular inversion motion in chemistr...
This paper outlines and tests two agency models of dividends. According to the "outcome model," dividends are paid because minority shareholders pressure corporate insiders to disgorge cash. According to the "substitute model," insiders interested in issuing equity in the future pay dividends to establish a reputation for decent treatment of minori...
In this paper, we investigate a neglected aspect of financial systems of many countries around the world; government ownership of banks. We assemble data which establish four findings. First, government ownership of banks is large and pervasive around the world. Second, such ownership is particularly significant in countries with low levels of per...
In this paper from the Yale School of Management, the authors describe the various forms that tunneling can take, and examine under what circumstances it is legal. Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. The authors also discuss two important legal principles-the du...
The political economy of trade policy has largely neglected popular election. When legislatures determine protection, politicians supply tariffs that are demanded by their constituents. A model of this political market is specified and tested with data related to the McKinley Tariff of 1890. An index of the extent to which tariff protection accrued...
We investigate empirically the determinants of the quality of governments in a large cross-section of countries. We assess government performance using measures of government intervention, public sector efficiency, public good provision, size of government, and political freedom. We find that countries that are poor, close to the equator, ethnoling...
Critics of privatization argue that the increased profitability of privatized companies comes at the expense of society. Using
data from 97 percent of those nonfinancial firms privatized in Mexico during the period 1983–1991, we study two channels for
social losses: (1) increased prices, and (2) layoffs and lower wages. Privatization is followed by...
This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common-law countries generally have the strongest, and French-civil-law countries the weakest, legal protections of investors, with German- and Scandinavi...
We investigate empirically the determinants of the quality of governments in a large cross-section of countries. We assess government performance using measures of government intervention, public sector efficiency, public good provision, size of government, and political freedom. We find that countries that are poor, close to the equator, ethnoling...
This paper addresses the question of why firms pay dividends, the so-called "dividend puzzle", from the agency perspective. We outline two agency models of dividends. On what we call &quo