The Degree of Judicial Enforcement and Credit Markets: Evidence from Japanese Household Panel Data
ISER Discussion Paper No. 764
31 Pages Posted: 7 Jan 2010
Date Written: December 23, 2009
In this paper, we conduct an empirical analysis of the impact of better judicial enforcement on the probability of being credit rationed, loan size, and the probability of bankruptcy using household-level data from the Japanese Panel Survey of Consumers, conducted by the Institute for Research on Household Economics, in conjunction with judicial data by court district on trial length and the ratio of the number of pending civil trials to the number of incoming civil trials. Contrary to the predictions of the existing theory, we find that better judicial enforcement increases the probability of being credit rationed and decreases loan size. Furthermore, we find that better judicial enforcement increases the probability of bankruptcy, a result that is consistent with lax screening effects.
Keywords: Judicial enforcement, Credit allocation, Credit rationing, Bankruptcy, Screening, Household Behavior, Borrowing
JEL Classification: D12, G21, G33, K12, K41, K42
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