Are Inventories a Buffer Against Weak Legal Systems?

Raja, Angara V.; Schaefer, Hans-Bernd

doi:10.1111/j.1467-6435.2007.00378.x

Cited by 5 publications

(2 citation statements)

References 22 publications

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“…They can encourage "hold-up" behavior (or non-compliance by a contracting party that was expected to supply an input or pay for a service). When this happens frequently, firms may be forced to procure from less efficient suppliers, or to adjust their desired investments downward to manage risks (Cungu and Swinnen, 2003), or they may be induced to keep inefficiently high inventories (a case of an undesired higher "investment"; Raja and Schaefer 2007). 3 More frequently noted, if banks fear that they will be unable to recover loans, they will be hesitant to lend and investments requiring external, bank financing may be hindered (Levine 1998).…”

Section: Conceptual Frameworkmentioning

confidence: 99%

Contract Enforcement, Investment and Growth in Uruguay since 1870

et al. 2013

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Institutions and their quality are central concepts in the recent development and institutional economics literatures. Our hypothesis is that inadequate contract enforcement has hindered investment and, in consequence, indirectly has had a negative effect on Uruguay's long-term growth performance. We first review the main concepts and the approaches to define and measure the quality of contract enforcement. We then introduce one measure that has the advantages of being measurable into the past and not depending on subjective judgments; namely, the "contract intensive money" (CIM) indicator proposed by Clague et al. (1999). Using our long series for the CIM indicator, and extending key macroeconomic variables backwards to 1870, we are able to estimate a structural model to explore the plausibility of our hypothesis. In the estimation, based on the seemingly unrelated regressions (SUR) method, we find support for the thesis that the quality of contract enforcement influences growth through its impact on investment. Put differently, our results suggest that poor contract enforcement played a significant role at the root of Uruguay's underperformance, and in its experience of (relative) long-run decline.

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Section: Conceptual Frameworkmentioning

confidence: 99%

Contract Enforcement, Investment and Growth in Uruguay since 1870

et al. 2013

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“…Sunstein, 1995). Standards, however, leave more questions open as far as interpretation, implementation and compliance within the judiciary system are concerned (Raja and Schaefer, 2004). Because of their history the transition economies in CEE lack experience in corporate governance topics (Black et al , 2000) and therefore cases brought to court require more time and effort.…”

Section: Applicationmentioning

confidence: 99%

Enlarged EU: enlarged corporate governance? Why directives might be more appropriate for transition economies

Braendle

Noll

2006

Corporate Governance: The International Journal of Business in Society

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PurposeThis paper seeks to illustrate the development of corporate governance issues in the transition economies of Central and Eastern Europe (CEE) and to analyze if codes based on directives or standards are better for these economies.Design/methodology/approachA chapter about corporate governance codes and the respective (dis)advantages of directives and standards starts the paper. Then common European and specific transition economies' corporate governance problems followed by a discussion of directives versus standards for CEE countries are described.FindingsThe paper finds that historical development of the transition economies in CEE leads to specific corporate governance problems such as high court delays, corruption and immature institutional investors. The introduction of corporate governance codes for these economies seems useful but should not rely on broad standards but on legally enforced binding rules accounting for the discussion of directives versus standards.Research limitations/implicationsResearch on the weaknesses of legal systems in transition economies is mainly verbally argued and needs more empirical backing. The discussion of directives versus standards is limited as we live in a world of flux – standards are becoming directives over time.Practical implicationsThe paper argues against the blindfold implementation of corporate governance codes of other countries and argues for country specific solutions keeping in minds the different effects of directives and standards.Originality/valueThe paper opposes the mainstream thinking that corporate governance codes are the ultimate ratio for transition economies in countries of CEE.

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