Financial Development, Property Rights and Growth

51 Pages Posted: 2 May 2002

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2002

Abstract

This Paper investigates how the legal framework not only affects the amount of external financing available, but also firms' resource allocation among different types of assets. Using a simple model, we show that in a weaker legal environment a firm will get less financing, and thus invest less, but also invest less in intangible assets. Empirically, these two effects appear to be equally important drivers of growth in sectoral value added for a large number of countries and using a number of robustness tests. Using individual firm data, we find further supporting evidence as weaker legal frameworks are associated with relatively more fixed assets, but less long-term financing for a given amount of fixed assets.

Keywords: Economic growth, intangible assets, financial development, property rights

JEL Classification: G31, G32, O34, O40

Suggested Citation

Claessens, Stijn and Laeven, Luc A., Financial Development, Property Rights and Growth (April 2002). Available at SSRN: https://ssrn.com/abstract=310441

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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