Which legal procedure affects business investment most, and which companies are most sensitive? Evidence from microdata

Daniel Dejuan-Bitria and Juan Mora-Sanguinetti

Economic Modelling, 2021, vol. 94, issue C, 201-220

Abstract: The negative impact of judicial inefficiency on investment decisions has been examined theoretically, supported by aggregate empirical studies at the country level. Whether this effect is observed at the firm level, however -and under what circumstances and through what channels it occurs- has yet to be determined. This paper fills the gap by analyzing the problem empirically for the period 2002–2016 using information from 650,000 firms (3.5 million observations). Our approach is novel, because it shows that the impact is greater in large companies than small ones, that it occurs more strongly in industrial companies, and that the civil (private) jurisdiction is the crucial one in achieving efficiency improvements. These findings are important for aggregate productivity growth.

Keywords: Business investment decisions; Judicial system; Legal procedures (search for similar items in EconPapers)
JEL-codes: D25 E22 K12 K41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:201-220

DOI: 10.1016/j.econmod.2020.09.023

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