What Firms Know
12 Pages Posted: 11 Jun 2008
Date Written: 5-30-2008
A large literature shows that the legal tradition of a country is highly correlated with various dimensions of institutional quality. Broadly, studies show that English common law countries perform better than the French civil law countries with respect to the regulatory burden on firms, efficiency of courts and contract enforcement, corruption and overall governance. The present paper adds to this literature by showing another aspect of institutional development that conforms to the same pattern. That is, ease with which information on laws and regulations is available to firms is superior in common law compared with civil law countries. Roughly, one-third of this difference can be explained by differences in the level of business regulations across the two legal traditions. Among other factors, we find that larger firms and smaller countries report much better availability of information than their respective counterparts. We provide some plausible reasons for these findings.
Keywords: Legal origin, Information, Institutions, Regulation
JEL Classification: H1, K4, P11, P51
Suggested Citation: Suggested Citation