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Are Fast Court Proceedings Good or Bad?: Evidence from Japanese Household Panel Data

  • Charles Yuji Horioka

    (Institute of Social and Economic Research - Osaka University)

  • Shizuka Sekita

    (JSPS - Japan Society for the Promotion of Science - Japan Society for the Promotion of Science)

We analyze the effect of the degree of judicial enforcement on the probability of credit constraints, the amount of loan and the probability of default. Contrary to the traditional view on judicial efficiency of credit market, our estimation results show that better judicial enforcement increases the probability of being rationed and decreases credit granted by banks, consistent with laziness effects. In order to confirm the laziness effect more directly, we analyzed the effect of the degree of judicial enforcement on the probability of default and found that better judicial enforcement increases the probability of default, as expected.

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Paper provided by HAL in its series Post-Print with number halshs-00407674.

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Date of creation: 2009
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Handle: RePEc:hal:journl:halshs-00407674
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  1. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2007. "Information Sharing and Credit: Firm-Level Evidence from Transition Countries," CEPR Discussion Papers 6313, C.E.P.R. Discussion Papers.
  2. Reint Gropp & John Karl Scholz & Michelle White, 1996. "Personal Bankruptcy and Credit Supply and Demand," NBER Working Papers 5653, National Bureau of Economic Research, Inc.
  3. Cox, Donald & Jappelli, Tullio, 1993. "The Effect of Borrowing Constraints on Consumer Liabilities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 197-213, May.
  4. Alberto Zazzaro, 2005. "Should Courts Enforce Credit Contracts Strictly?," Economic Journal, Royal Economic Society, vol. 115(500), pages 166-184, 01.
  5. Bianco, Magda & Jappelli, Tullio & Pagano, Marco, 2002. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," CEPR Discussion Papers 3347, C.E.P.R. Discussion Papers.
  6. Jeremy Berkowitz & Michelle J. White, 2004. "Bankruptcy and Small Firms' Access to Credit," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 69-84, Spring.
  7. Duca John V. & Rosenthal Stuart S., 1993. "Borrowing Constraints, Household Debt, and Racial Discrimination in Loan Markets," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 77-103, October.
  8. Miki Kohara & Charles Yuji Horioka, 2006. "Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan," ISER Discussion Paper 0663, Institute of Social and Economic Research, Osaka University.
  9. Daniela FABBRI & Mario PADULA, 2003. "Does Poor Legal Enforcement Make Households Credit-Constrained?," FAME Research Paper Series rp81, International Center for Financial Asset Management and Engineering.
  10. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June.
  11. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
  12. Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-44, Winter.
  13. Silvia Magri, 2007. "Italian households’ debt: the participation to the debt market and the size of the loan," Empirical Economics, Springer, vol. 33(3), pages 401-426, November.
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