Legal rights, information sharing, and private credit: New cross-country evidence

• Published in: The Quarterly review of economics and finance Vol. 54; no. 3; pp. 315 - 323
• Main Author: Nketcha Nana, P.V.
• Format: Journal Article
• Language: English
• Published: Greenwich Elsevier Inc 01.08.2014; Elsevier Science Ltd
• Subjects: Bond markets; Civil rights; Contract enforceability; Credit information-sharing; Enforcement; GDP; Gross Domestic Product; Information sharing; Legal rights; Manycountries; Private credit; Studies; Contract enforceability; Credit information-sharing; Legal rights; Private credit
• ISSN: 1062-9769; 1878-4259
• DOI: 10.1016/j.qref.2014.02.002

•This paper revisits the link between credit market institutions and private credit.•It uses recent data and improved measures from Doing Business.•Results indicate significant effects from law, enforcement, and information-sharing to private credit.•The results are robust against sample variations and several other empirical issues. Using improved measures and recent data from Doing Business, this paper reexamines the effects of legal systems and information-sharing on private credit. The results indicate that stronger legal rights, better contract enforceability and better information sharing are associated with higher private credit to GDP ratios across countries. These effects are significant even when the sample is restricted to include either developing countries only or poor countries only, but the effects of both legal rights and enforcement are stronger the richer the countries. Still, there is no evidence of substitution patterns among credit market institutions in poor countries. Overall, this paper may be viewed as enhancing the robustness as well as the generalizability of earlier evidence aimed at establishing a link between legal and information-sharing institutions on one hand, and the size of credit market on other hand.