The quality of the legal system, firm ownership, and firm size

• 成果类型: Article
• 署名作者: Laeven, Luc; Woodruff, Christopher
• 署名单位: International Monetary Fund; University of California System; University of California San Diego
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest.89.4.601
• 发表日期: 2007-11
• 页码: 601-614
• 关键词: PROPERTY-RIGHTS; institutions

摘要

We show that firm size is increasing with the quality of the legal system in Mexico. A 1-standard-deviation improvement in the quality of the legal system is associated with a 0.15-0.30 standard deviation increase in firm size. We also show that the legal system affects firm size by reducing the idiosyncratic risk faced by firm owners. The legal system has a smaller impact on partnerships and corporations than on proprietorships, where risk is concentrated in a single owner. All of the findings are robust to instrumenting for legal quality using historical conditions. By focusing on firms in a single country, the data draw attention to the importance of informal institutions.