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Are Russian commercial courts biased? Evidence from a bankruptcy law transplant

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  • Lambert-Mogiliansky, Ariane
  • Sonin, Konstantin
  • Zhuravskaya, Ekaterina

Abstract

We study the nature of judicial bias in bankruptcy proceedings following the enactment of the 1998 bankruptcy law in Russia. The two main findings are as follows. First, regional political characteristics affected judicial decisions about the number and types of bankruptcy proceedings initiated after the law took effect. Controlling for indicators of firms’ insolvency and the quality of the regional judiciary, re-organization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal center. Poor judicial quality was also associated with higher incidence of re-organizations. Second, the quality of the regional judiciary ffected performance of firms under the re-organization procedure: in regions with low quality judges, firms that were re-organized according to the 1998 law had significantly lower growth in sales, labor productivity, and product variety compared to firms not subject to bankruptcy proceedings. In contrast, in regions with high quality judges, firms in re-organization outperformed firms not in bankruptcy proceedings. This effect of judicial quality on the performance of re-organized firms was stronger when governors were politically popular. These findings are consistent with the view that politically strong governors subverted enforcement of the 1998 bankruptcy law.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 35 (2007)
Issue (Month): 2 (June)
Pages: 254-277

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Handle: RePEc:eee:jcecon:v:35:y:2007:i:2:p:254-277

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Web page: http://www.elsevier.com/locate/inca/622864

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References

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Citations

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Cited by:
  1. Nicola Gennaioli & Stefano Rossi, 2012. "Contractual Resolutions of Financial Distress," Working Papers 651, Barcelona Graduate School of Economics.
  2. Bruno, Randolph Luca & Bytchkova, Maria & Estrin, Saul, 2011. "Institutions and Entry: A Cross-Regional Analysis in Russia," IZA Discussion Papers 5504, Institute for the Study of Labor (IZA).
  3. Régis Blazy & Bertrand Chopard & Agnès Fimayer & Jean-Daniel Guigou, 2009. "Financial versus Social Efficiency of Corporate Bankruptcy Law: the French Dilemma?," Working Papers of BETA 2009-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Uluc Aysun, 2011. "The implications of dynamic financial frictions for DSGE models," Working papers 2011-07, University of Connecticut, Department of Economics.
  5. Berkowitz, Daniel & DeJong, David N., 2011. "Growth in post-Soviet Russia: A tale of two transitions," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 133-143, June.
  6. Blazy, Régis & Chopard, Bertrand & Fimayer, Agnès & Guigou, Jean-Daniel, 2011. "Employment preservation vs. creditors' repayment under bankruptcy law: The French dilemma?," International Review of Law and Economics, Elsevier, vol. 31(2), pages 126-141, June.
  7. Chemin, Matthieu, 2009. "Do judiciaries matter for development? Evidence from India," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 230-250, June.
  8. Iwasaki, Ichiro, 2013. "Global Financial Crisis, Corporate Governance, and Firm Survival: The Russian Experience," RRC Working Paper Series 37, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
  9. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
  10. Uluc Aysun, 2009. "An alternative method for measuring financial frictions," Working papers 2009-34, University of Connecticut, Department of Economics.

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