Law and Finance Matter: Lessons from Externally Imposed CourtsThe Review of Financial Studies
Publication VersionAccepted Manuscript
AbstractThis paper provides novel evidence on the real and financial market effects of legal institutions. Our analysis exploits persistent and externally imposed differences in court enforcement that arose when the U.S. Congress assigned state courts to adjudicate contracts on a subset of Native American reservations. Using area-specific data on small business lending, we find that reservations assigned to state courts, which enforce contracts more predictably than tribal courts, have stronger credit markets. Moreover, the law-driven component of credit market development is associated with significantly higher per capita income, with stronger effects in sectors that depend more on external financing.
Copyright OwnerOxford Academic
Citation InformationJames R. Brown, J. Anthony Cookson and Rawley Z. Heimer. "Law and Finance Matter: Lessons from Externally Imposed Courts" The Review of Financial Studies Vol. 30 Iss. 3 (2016) p. 1019 - 1051
Available at: http://works.bepress.com/james-brown/9/