Property Rights Institutions and Firm Performance: A Cross-Country Analysis
University of Texas at Arlington - Department of Economics; Emory University - Department of Economics
Catherine J. Morrison Paul
University of California, Davis - Department of Agricultural and Resource Economics; National Bureau of Economic Research (NBER); University of Hartford - Barney School of Business
Michael R. Ward
University of Texas at Arlington - College of Business Administration - Department of Economics
June 1, 2009
World Development, Volume 39, Issue 4, April 2011, Pages 648–661
This paper empirically examines the link between firms’ performance and institutional quality using data for firms in 52 countries. We control for potential endogeneity by instruments alternatively based on legal origin and “related-firm” institutions, and by a “bribery” variable. We also use two indicators of institutional quality: firms’ expectations that their contractual and property rights will be protected by the legal system, and a property rights index from The Heritage Foundation. We incorporate firm-specific characteristics including industry type and international linkages. We find significantly positive relationships between firms’ performance and perceived property rights protection independent of other observable firm characteristics.
Keywords: legal enforcement; property rights, institutions; firm performance; productivity, cross-country analysis
JEL Classification: D73, K42, M14, D24, L25, O12Accepted Paper Series
Date posted: August 5, 2009 ; Last revised: May 21, 2012
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