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| Author: | Fabbri, D. |
| Title: | Law enforcement and firm financing: Theory and evidence |
| Journal: | Journal of the European Economic Association
2010 : JUN, VOL. 8:4, p. 776-816 |
| Index terms: | financing companies banks credit savings Spain policy theories models |
| Freeterms: | law enforcement |
| Language: | eng |
| Abstract: | This paper examines the economic effects on firms' policies of differences in law enforcement (henceforth as: l-et). It is found that in judicial districts with longer trials, bank financing is more costly and firms are smaller. However, there is not found any significant relation btw. l-et. and firms' leverage ratio. The paper's results are explained within a 2-region dynamic general equilibrium model with asymmetric information and collateralized credit contracts. It is found that a stronger enforcement of creditors' rights both improves credit conditions and fosters individual capital accumulation. There is found a positive relation btw. individual savings and quality of l-et. |
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