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Cover of: Ownership and Allocation of Capital: Evidence from 44 Countries
Johan E. Eklund, Sameeksha Desai

Ownership and Allocation of Capital: Evidence from 44 Countries

Section: Articles
Volume 170 (2014) / Issue 3, pp. 427-452 (26)
Published 09.07.2018
DOI 10.1628/093245614X14006508036247000000
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  • 10.1628/093245614X14006508036247000000
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Summary
In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 11,984 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets.