Court Quality and Economic Resilience

67 Pages Posted: 26 Feb 2020 Last revised: 3 Mar 2021

See all articles by Dimas Fazio

Dimas Fazio

National University of Singapore (NUS) - Department of Finance

Thiago Silva

Government of the Federative Republic of Brazil - Central Bank of Brazil

Janis Skrastins

Washington University in St. Louis - John M. Olin Business School

Date Written: March 3, 2021

Abstract

We investigate how court quality affects the transmission of shocks across firms. Using novel inter-firm wire transfer data, we find that suppliers exposed to natural disasters pass this shock to their customers, particularly when the court system is congested. Evidence suggests that congested courts amplify spillovers through the contracting frictions that customers face with new suppliers and creditors. Subsequently, customers vertically integrate the production of affected inputs and obtain liquidity by selling their accounts receivables. Our results highlight the importance of institutions in facilitating economic resilience.

Keywords: courts, economic fragility, contract enforcement, networks, propagation

JEL Classification: D02, E02, L14, E23, E32

Suggested Citation

Fazio, Dimas and Silva, Thiago and Skrastins, Janis, Court Quality and Economic Resilience (March 3, 2021). Available at SSRN: https://ssrn.com/abstract=3517257 or http://dx.doi.org/10.2139/ssrn.3517257

Dimas Fazio

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

Thiago Silva

Government of the Federative Republic of Brazil - Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70074-900
Brazil

Janis Skrastins (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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