Abstract
Basing on the external financing analysis framework of asymmetric information, the paper establishes a general equilibrium model which contains the investor protection. First of all, this paper investigates that the investor protection are how to influence the size of the equilibrium interest rate, and investigates the internal mechanism of the investor protection impact of capital market equilibrium interest rate. Secondly, the paper study the effect that the investor protection on different classes of entrepreneurs investment activities and welfare, proved that firms with very weak balance sheets are not suffered any injury from a weaker investor protection policy. Entrepreneurs whose financial strength are in the borderline of policy are given the greatest effect from the weaker investor protection policy; A weaker investor protection policy has a positive impact on firms with strong balance sheets.
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