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Financial Development in Adversarial and Inquisitorial Legal Systems

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  • Massenot Baptiste

Abstract

This paper analyzes how the adversarial and inquisitorial evidence collection procedures affect financial development. In investigating the true returns of insolvent entrepreneurs, the adversarial procedure relies on lawyers whereas the inquisitorial procedure relies on judges. Investors are willing to lend more in adversarial than in inquisitorial legal systems if they are richer than entrepreneurs or if lawyers are more productive than judges. Manipulation of evidence by lawyers has an ambiguous impact on finance. The empirical evidence shows that a more inquisitorial procedure is associated with less developed financial markets.

Suggested Citation

  • Massenot Baptiste, 2010. "Financial Development in Adversarial and Inquisitorial Legal Systems," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 10.13, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:10.13
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    References listed on IDEAS

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    Cited by:

    1. Massenot Baptiste, 2014. "Lawyers and Investment," Review of Law & Economics, De Gruyter, vol. 9(3), pages 439-452, January.
    2. Massenot, Baptiste, 2010. "Contract enforcement, litigation, and economic development," MPRA Paper 27501, University Library of Munich, Germany.

    More about this item

    Keywords

    adversarial; inquisitorial; financial development; legal origins;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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