Handbook of Research on IPOs
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Handbook of Research on IPOs

Edited by Mario Levis and Silvio Vismara

The Handbook of Research on IPOs provides a comprehensive review of the emerging trends and directions in the global initial public offerings (IPO) markets. The empirical evidence included in the book covers Europe, the US and the Far East, and presents a truly global perspective of IPO markets around the world and at the different stages of the entire IPO process.
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Chapter 7: Investor protection and IPO survival in the Italian stock market

Mattia Cattaneo and Michele Meoli


‘How does better protection of outside investors (both shareholders and creditors) promote market development?’ (La Porta et al., 2002, p. 1147). This research question sanctioned the beginning of the law and finance literature and has captured the attention of many scholars in the past decade. Since the seminal work by La Porta et al. (1997), previous research has shown that an effective legal system supports the development of financial markets, and has then identified in laws and their enforcement one of the key mechanisms to protect outsider investors. Despite the growing interest on the effects of regulation, researchers know relatively little about the impact of changes in investor protection on the evolution of financial markets. Prior scholars provided empirical evidence on the relationship between investor protection and stock market development either in a static perspective (for example, La Porta, 1997, 1998) or considering concise periods of time (for example, Armour et al., 2009). Nevertheless, considerable changes in laws relating to investor protection take along time to become effective (Levine, 2011) and, thus, a long-run perspective is necessary to generate convincing evidence (Gehrig and Fohlin, 2006).

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