Legal Restrictions and Investment Growth

26 Pages Posted: 26 Oct 2007

See all articles by Robert Lensink

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group

Bert Scholtens

University of Groningen - Department of Finance & Accounting

Abstract

We analyze the impact of legal restrictions on investment growth at the firm level. With the help of a unique firm-level survey database, we analyze whether firm investments are related to the efficiency and quality of the judiciary. Furthermore, we analyze whether the investment behavior of large and small firms is influenced in the same manner and degree. Our results provide strong support for the hypothesis that investment growth may be hampered by laws that are experienced as negative by firms. We find that it especially is the smaller firms which are restricted by laws in their investment behavior. Larger (international) firms are better able to cope with the rules. These results are robust to different estimators.

Suggested Citation

Lensink, Robert and Scholtens, Bert, Legal Restrictions and Investment Growth. Kyklos, Vol. 60, No. 4, pp. 575-600, November 2007, Available at SSRN: https://ssrn.com/abstract=1024612 or http://dx.doi.org/10.1111/j.1467-6435.2007.00386.x

Robert Lensink (Contact Author)

University of Groningen - Department of Economics, Econometrics and Finance ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Bert Scholtens

University of Groningen - Department of Finance & Accounting ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

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