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Property Rights and Finance

  • Simon Johnson
  • John McMillan
  • Christopher Woodruff

Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.

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File URL: http://www.nber.org/papers/w8852.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8852.

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Date of creation: Mar 2002
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Publication status: published as Johnson, Simon, John McMillan and Christoher Woodruff. "Property Rights And Finance," American Economic Review, 2002, v92(5,Dec), 1335-1356.
Handle: RePEc:nbr:nberwo:8852
Note: CF
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