Property Rights and Finance

Simon Johnson, John McMillan and Christopher Woodruff

Chapter 7 in The Economics of Transition, 2007, pp 213-242 from Palgrave Macmillan

Abstract: Abstract 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. (JEL D23, P23)

Date: 2007
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DOI: 10.1057/978-1-349-74092-5_7

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