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Creditor Protection and Banking System Development in India

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  • Simon Deakin

    (University of Cambridge)

  • Panicos Demetriades

    (University of Leicester)

  • Gregory James

    (University of Leicester)

Abstract

We use a new legal dataset tracking changes in creditor protection law over several decades to study the impact of legal reform on banking system development in India. Cointegration analysis is used to show that the strengthening of creditor rights in relation to the enforcement of security iterests in the 1990s and 2000s led to an increase in bank credit. We show that the change in the law was not endogenous to trends in stock market development and GDP per capita, and that the direction of causation ran from legal reform to banking development, rather than the reverse.

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Bibliographic Info

Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0038.

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Date of creation: Aug 2008
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Handle: RePEc:wef:wpaper:0038

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Keywords: creditor rights; legal origin; banking development; India;

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References

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  1. Arestis, Philip & Demetriades, Panicos O & Luintel, Kul B, 2001. "Financial Development and Economic Growth: The Role of Stock Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 16-41, February.
  2. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
  3. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
  4. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  5. John Armour & Simon Deakin & Prabirjit Sarkar & Mathias Siems & Ajit Singh, 2008. "Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis," WEF Working Papers 0041, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  6. Panicos O. Demetriades & Kul B. Luintel, 1997. "The Direct Costs Of Financial Repression: Evidence From India," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 311-320, May.
  7. John Armour & Priya Lele, 2008. "Law, Finance, and Politics: The Case of India," ESRC Centre for Business Research - Working Papers wp361, ESRC Centre for Business Research.
  8. Priya P. Lele & Mathias M. Siems, 2007. "Shareholder Protection: A Leximetric Approach," Money Macro and Finance (MMF) Research Group Conference 2006 170, Money Macro and Finance Research Group.
  9. Simon DEAKIN & Priya LELE & Mathias SIEMS, 2007. "The evolution of labour law: Calibrating and comparing regulatory regimes," International Labour Review, International Labour Organization, vol. 146(3-4), pages 133-162, 09.
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Cited by:
  1. Deakin, Simon & Sarkar, Prabirjit & Singh, Ajit, 2011. "An end to consensus? the selective impact of corporate law reform on financial development," MPRA Paper 39047, University Library of Munich, Germany.
  2. Armour, J. & Deakin, S. & Mollica, V. & Siems, M.M., 2010. "Law and Financial Development: What we are learning from time-series evidence," ESRC Centre for Business Research - Working Papers wp399, ESRC Centre for Business Research.
  3. Laura Capera & Andrés Murcia Pabón & Dairo Estrada, . "Efectos de los Límites a las Tasas de Interés sobre la Profundización Financiera," Temas de Estabilidad Financiera 057, Banco de la Republica de Colombia.
  4. Deakin, Simon & Sarkar, Prabirjit & Singh, Ajit, 2010. "An End to Consensus? The (Non) Impact of Legal Reforms on Financial Development," MPRA Paper 53352, University Library of Munich, Germany.

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