Courts, firms and allocation of credit
AbstractThe paper investigates whether and how performance of regional commercial courts has affected external credit of Russian enterprises between 1995 and 2002. The results show that more reliable courts lead to higher bank lending to firms. This occurs predominantly through expansion of the number of businesses which have access to bank financing. There is limited evidence that trade credit also responds to changes in quality of courts. However, credit from suppliers is considerably less sensitive to court performance than bank credit. Court reliability is precisely defined and measured objectively using appeal rates of lower court decisions. The paper analytically derives the relationship between reliability of courts, appeal rates and lending to firms, identifying a specific channel through which law enforcement affects external financing. Empirical analysis is based on a new panel dataset which measures credit at the level of a firm and permits a number of robustness tests.
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Bibliographic InfoPaper provided by EconWPA in its series Development and Comp Systems with number 0509026.
Length: 27 pages
Date of creation: 29 Sep 2005
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law enforcement; finance;
Find related papers by JEL classification:
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
- H40 - Public Economics - - Publicly Provided Goods - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-08 (All new papers)
- NEP-COM-2005-10-08 (Industrial Competition)
- NEP-FIN-2005-10-08 (Finance)
- NEP-LAW-2005-10-08 (Law & Economics)
- NEP-PBE-2005-10-08 (Public Economics)
- NEP-REG-2005-10-08 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daniel Berkowitz & Katharina Pistor & Jean-Francois Richard, 2000.
"Economic Development, Legality, and the Transplant Effect,"
CID Working Papers
39, Center for International Development at Harvard University.
- Berkowitz, Daniel & Pistor, Katharina & Richard, Jean-Francois, 2003. "Economic development, legality, and the transplant effect," European Economic Review, Elsevier, vol. 47(1), pages 165-195, February.
- Daniel Berkowitz & Karina Pistor & Jean-Francois Richard, 2001. "Economic Development, Legality, and the Transplant Effect," William Davidson Institute Working Papers Series 410, William Davidson Institute at the University of Michigan.
- Daniel Berkowitz & Katharina Pistor & Jean-Francois Richard, 2000. "Economic Development, Legality, and the Transplant Effect," William Davidson Institute Working Papers Series 308, William Davidson Institute at the University of Michigan.
- Evguenia Bessonova & Konstantin Kozlov & Ksenia Yudaeva, 2003. "Trade Liberalization, Foreign Direct Investment, and Productivity of Russian Firms," DEGIT Conference Papers c008_009, DEGIT, Dynamics, Economic Growth, and International Trade.
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