Working Paper: NBER ID: w10687
Authors: Thorsten Beck; Asli Demirgüç-Kunt; Ross Levine
Abstract: This paper contributes to the literature on how a country's legal origin influences the operation of its financial system by using firm-level survey data on the obstacles that firms face in raising external finance. The paper assesses two channels through which legal origin may influence the financial system. It finds that the adaptability of a country's legal system is more important for explaining the obstacles that firms face in accessing external finance than the political independence of the judiciary.
Keywords: Legal origin; Financial system; Judicial independence; Adaptability; External finance
JEL Codes: K4; G3; H1; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Political independence of the judiciary (K40) | Protection of private property rights (P14) |
| Political independence of the judiciary (K40) | Facilitation of financial activities (G29) |
| Judicial independence (K16) | Reduced financing obstacles (G32) |
| Adaptability of a country's legal system (K40) | Obstacles firms face in accessing external finance (G32) |
| Judicial decisions as a source of law (K41) | Financing obstacles (G32) |
| French legal origin (K15) | Higher obstacles accessing external finance (O16) |