This paper argues that the key mechanisms protecting retail investors' financial stake in their portfolio investments are indirect. They do not rely on actions by the investors or by any private actor directly charged with looking after investors' interests. Rather, they are provided by the...

A popular research design identifies the effects of corporate governance by (changes in) state laws, clustering standard errors by state of incorporation. Using Monte-Carlo simulations, this paper shows that conventional statistical tests based on these standard errors dramatically overreject:...