Property Rights and Finance
Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)
Stanford Graduate School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Christopher M. Woodruff
University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)
Stanford Law and Economics Olin Working Paper No. 231
Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.
Number of Pages in PDF File: 64
JEL Classification: D23, P23working papers series
Date posted: March 21, 2002
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