 Financial development in adversarial and inquisitorial legal systemsJournal of Comparative Economics, 2011, vol. 39, issue 4, 602-608 Abstract: This paper aims to understand why common law countries have more developed financial markets than civil law countries. One difference between these two legal origins is the procedure of evidence collection for a trial: It is adversarial in common law and inquisitorial in civil law. The adversarial system delegates the collection of evidence to a larger extent to lawyers than the inquisitorial system does. The paper presents a model of law and finance in which investors use courts to enforce their financial contracts with entrepreneurs. Investors are willing to lend more if courts collect evidence more efficiently. Financial markets are more developed in the adversarial than in the inquisitorial system if investors are richer than entrepreneurs or if lawyers are more productive than judges. Manipulation of evidence by lawyers has an ambiguous impact on finance. Keywords: Adversarial; Inquisitorial; Financial development; Legal origins (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:39:y:2011:i:4:p:602-608 DOI: 10.1016/j.jce.2011.07.003 Access Statistics for this article Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland More articles in Journal of Comparative Economics from Elsevier |
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