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Judicial efficiency and loan performance: micro evidence from Serbia

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  • Miloš Božović

    (University of Belgrade)

Abstract

There is plenty of evidence that judicial efficiency reduces credit rationing and increases lending. In contrast, inefficient courts may lead to borrowers’ opportunistic behavior and, as a result, decrease loan performance and the availability of credit. We combine caseload data from commercial courts in Serbia with micro-data on company loans to study the impact of judicial efficiency on loan performance. We document the presence of a robust negative relationship between the clearance rate and the number of days in arrears for companies from the districts under corresponding court jurisdictions. We use financial ratios, industry dummies and time fixed effects to control for the usual determinants of payment ability.

Suggested Citation

  • Miloš Božović, 2021. "Judicial efficiency and loan performance: micro evidence from Serbia," European Journal of Law and Economics, Springer, vol. 52(1), pages 33-56, August.
    • Handle: RePEc:kap:ejlwec:v:52:y:2021:i:1:d:10.1007_s10657-021-09696-4
    DOI: 10.1007/s10657-021-09696-4
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    More about this item

    Keywords

    Court efficiency; Contract enforcement; Payment arrears; Clearance rate; Credit market;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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