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Judicial Efficiency and Lending Quality

Vincenzo D'Apice (), Franco Fiordelisi and Giovanni W. Puopolo ()
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Vincenzo D'Apice: Center for Relationship Banking and Economics (CERBE).
Giovanni W. Puopolo: Università di Napoli Federico II and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We investigate the causal relationship between the efficiency of country’s judicial system and the quality of bank lending, using the enforcing contracts reforms that have been implemented in four European countries as a quasi-natural experiment. We find that improvements of enforcing contracts determine large, significant, and persistent reductions of banks’ non-performing-loans (NPLs). These findings are robust to several difference-in-difference tests and reverse causality concerns. Our results have important policy implications especially at the light of the recent Covid-19 pandemic since they may help the banking system mitigate the virus’ negative financial effects.

Keywords: Judicial Systems; Non-Performing Loans; Banking Stability. (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2020-11-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eff, nep-fdg and nep-law
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