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The Degree of Judicial Enforcement and Credit Markets: Evidence from Japanese Household Panel Data

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  • CHARLES YUJI HORIOKA
  • SHIZUKA SEKITA

Abstract

In this paper, we conduct an empirical analysis of the impact of better judicial enforcement on the probability of being credit rationed, loan size, and the probability of bankruptcy using household-level data from the Japanese Panel Survey of Consumers, conducted by the Institute for Research on Household Economics, in conjunction with judicial data by court district on trial length and the ratio of the number of pending civil trials to the number of incoming civil trials. Contrary to the predictions of the existing theory, we find that better judicial enforcement increases the probability of being credit rationed and decreases loan size. Furthermore, we find that better judicial enforcement increases the probability of bankruptcy, a result that is consistent with lax screening effects.
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Suggested Citation

  • Charles Yuji Horioka & Shizuka Sekita, 2011. "The Degree of Judicial Enforcement and Credit Markets: Evidence from Japanese Household Panel Data," International Review of Finance, International Review of Finance Ltd., vol. 11(2), pages 245-268, June.
    • Handle: RePEc:bla:irvfin:v:11:y:2011:i:2:p:245-268
    DOI: j.1468-2443.2010.01123.x
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    File URL: http://hdl.handle.net/10.1111/j.1468-2443.2010.01123.x
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    Cited by:

    1. Ramos Maqueda,Manuel & Chen,Daniel Li, 2021. "The Role of Justice in Development : The Data Revolution," Policy Research Working Paper Series 9720, The World Bank.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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