†Center for International Banking, Insurance, and Finance (CIBIF); University of Groningen, The Netherlands.
Legal Restrictions and Investment Growth
Article first published online: 24 OCT 2007
Volume 60, Issue 4, pages 575–600, November 2007
How to Cite
Lensink, R. and Scholtens, B. (2007), Legal Restrictions and Investment Growth. Kyklos, 60: 575–600. doi: 10.1111/j.1467-6435.2007.00386.x
- Issue published online: 24 OCT 2007
- Article first published online: 24 OCT 2007
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.