Law and Firms' Access to Finance
Why does a country's legal origin
influence its firms' access to finance? Using data from
over 4,000 firms in 38 countries, the authors show that
firms in countries with French legal origin face
significantly higher obstacles in accessing external finance
than firms in common law countries. Next, their results
indicate that French legal origin countries tend to have (1)
less adaptable legal systems, as defined by the degree to
which case law and principles of equity rather than simply
statutory law are accepted foundations of legal decisions,
and (2) less politically independent judiciaries, as defined
by the degree of tenure of supreme court judges and their
jurisdiction over cases involving the government. Finally,
the authors find that the adaptability of a country's
legal system is more important for explaining the obstacles
that firms face in contracting for external finance than the
political independence of the judiciary. So, they
distinguish among competing explanations of why law matters
for financial development by empirically documenting the
links running from international differences in legal origin
to the operation of the financial system at the firm level.
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Bibliographic Details
| Main Authors: |
Levine, Ross,
Beck, Thorsten,
Demirgüç-Kunt, Asli |
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| Language: | English
en_US |
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| Published: |
World Bank, Washington, DC
2004-01
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| Subjects: | AGGREGATE INDICATOR,
APPLICABLE LAW,
BANKING SECTOR,
BUREAUCRACY,
BUSINESS ENVIRONMENT,
CASE LAW,
CIVIL CODES,
CIVIL LAW,
CODES,
COLONIES,
COMMON LAW,
COMPARATIVE LAW,
COUNTRY CHARACTERISTICS,
COURT DECISIONS,
COURT SYSTEM,
COURTS,
DISPUTE RESOLUTION,
ECONOMIC DEVELOPMENT,
ECONOMIC GROWTH,
FINANCIAL DEVELOPMENT,
FINANCIAL SYSTEM,
FINANCIAL SYSTEMS,
FINANCING CONSTRAINTS,
FOREIGN ENTITY,
FOREIGN INVESTORS,
GROWTH RATE,
INCOME,
INDEPENDENT JUDICIARY,
INSTITUTIONAL DEVELOPMENT,
JUDGES,
JUDICIAL DECISIONS,
JUDICIAL INDEPENDENCE,
JUDICIAL POWER,
JUDICIAL SYSTEM,
JUDICIARY,
JURISPRUDENCE,
LAW FIRMS,
LAW INDICATOR,
LAWS,
LEGAL CODES,
LEGAL DOCTRINE,
LEGAL FORMALISM,
LEGAL FORMS,
LEGAL INSTITUTIONS,
LEGAL ORIGIN,
LEGAL ORIGINS,
LEGAL RIGHTS,
LEGAL STRUCTURE,
LEGAL SYSTEM,
LEGAL SYSTEMS,
LEGAL TRAINING,
LEGISLATURE,
LIQUIDATION,
LITIGATION,
MANUFACTURING SECTOR,
MEASUREMENT ERROR,
MOTIVATIONS,
PRIVATE PROPERTY,
PROPERTY RIGHTS,
REPRESENTATIVES,
REVERSE CAUSATION,
REVOLUTION,
RULE OF LAW,
RULINGS,
STATE POWER,
STATUTORY RIGHTS,
SUPREME COURTS,
AGGREGATE INDEXES,
POLITICAL INDEPENDENCE, |
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| Online Access: | http://documents.worldbank.org/curated/en/2004/01/3172100/law-firms-access-finance
https://hdl.handle.net/10986/15630
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