Property Rights and Finance

65 Pages Posted: 23 Mar 2002 Last revised: 27 Oct 2010

See all articles by Simon Johnson

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Christopher M. Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2002

Abstract

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.

Suggested Citation

Johnson, Simon and McMillan, John and Woodruff, Christopher, Property Rights and Finance (March 2002). NBER Working Paper No. w8852. Available at SSRN: https://ssrn.com/abstract=305078

Simon Johnson (Contact Author)

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center ( email )

United States
617-253-8412 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christopher Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States
858-534-0590 (Phone)
858-534-3939 (Fax)

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