We develop a model of endogenous lobby formation in which wealth inequalityand political accountability undermine entry and financial development. In-cumbents seek a low level of effective investor protection to prevent potentialentrants from raising capital. They succeed because they can...

We develop a model to illustrate that controlling shareholders choose the level of investor protection that maximizes their own interests. Controlling shareholders in companies with complicated control structures can easily extract private benefits and are thus reluctant to enhance investor...