How Well do Institutional Theories Explain Firms' Perceptions of Property Rights?
University of Maryland - Robert H. Smith School of Business
George Washington University - School of Business
World Bank - Development Research Group; World Bank
World Bank Policy Research Working Paper No. 3709
We examine how well several institutional and firm-level factors explain firms' perceptions of property rights protection. Our sample includes private and public firms which vary in size from very small to large in 80 countries. Together, the institutional theories we investigate account for approximately 50 percent of the country-level variation, indicating that the literature is addressing first-order factors. Firm-level characteristics, such as legal organization and ownership structure, are comparable to institutional factors in explaining variation in property rights protection. A country's legal origin predicts property rights variation better than its religion, its ethnic diversity, or natural endowments. However, these results are driven by the inclusion of former Socialist economies in the sample. When we exclude the former Socialist economies, legal origin explains considerably less than ethnic fractionalization.
Number of Pages in PDF File: 47
Keywords: Law, Property Rights, Variance Decomposition
JEL Classification: D23, K4, C5
Date posted: February 21, 2005