Agent's Response to Inefficient Judiciary: Social Norms and the Law in Transition

28 Pages Posted: 13 May 2009

See all articles by Aleksandra Gregoric

Aleksandra Gregoric

Copenhagen Business School

Katarina Zajc

University of Ljubljana - Faculty of Law

Marko Simoneti

University of Ljubljana, The Faculty of Law

Date Written: May 12, 2009

Abstract

The paper questions the impact of the rule-based governance in an environment with poor legal enforcement and general mistrust in the law-setting institutions. We test whether, in such an environment, the ‘law on books’ can still play a role by triggering the social norm of ‘obeying the law’. The results of the psychological experiment confirm that this pressure for legal compliance may still be in place despite the inefficiencies in formal enforcement. Its ‘strength’ however varies across the countries. Thus, policy efforts in the developing countries should be oriented also towards the re-enforcement of this complementary support to the implementation of the rule of law. By disseminating information about the legal rules, Corporate Governance Code could be one result of such efforts and may help the society internalize the ‘new’ corporate legislation. We furthermore expose the potential of the Corporate Governance Code as the ‘signaling tool’ and provide evidence as to why in a weak institutional environment the Code’s potential may be even stronger than in the developed market economies.

Keywords: legal enforcement, law on books, social norms, governance code

JEL Classification: G30, G18, A13

Suggested Citation

Gregoric, Aleksandra and Zajc, Katarina and Simoneti, Marko, Agent's Response to Inefficient Judiciary: Social Norms and the Law in Transition (May 12, 2009). Available at SSRN: https://ssrn.com/abstract=1403816 or http://dx.doi.org/10.2139/ssrn.1403816

Aleksandra Gregoric (Contact Author)

Copenhagen Business School ( email )

Porcelænshaven 24
Frederiksberg C, DK - 2000
Denmark

Katarina Zajc

University of Ljubljana - Faculty of Law ( email )

Dunajska 104
1000 Ljubljana, 1000
Slovenia

Marko Simoneti

University of Ljubljana, The Faculty of Law ( email )

Poljanski nasip 2
Ljubljana, 1000
Slovenia

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