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Are Russian Commercial Courts Biased? Evidence from a Bankruptcy Law Transplant

28 Pages Posted: 22 Oct 2006 Last revised: 24 Nov 2014

Adriane Lambert Mogiliansky

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); New Economic School (NES)

Konstantin Sonin

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Date Written: December 25, 2006

Abstract

We study the nature of judicial bias in bankruptcy proceedings following the enactment of the 1998 bankruptcy law in Russia. The two main findings are as follows. First, regional political characteristics affected judicial decisions about the numbers and types of bankruptcy proceedings initiated after the law took effect. Controlling for indicators of firms' insolvency and the quality of the regional judiciary, re-organization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal center. Poor judicial quality was also associated with higher incidence of re-organizations. Second, the quality of the regional judiciary affected performance of firms under the re-organization procedure: in regions with low quality judges, firms that were re-organized according to the 1998 law had significantly lower growth in sales, labor productivity, and product variety compared to firms not subject to bankruptcy proceedings. In contrast, in regions with high quality judges, firms in re-organization outperformed firms not in bankruptcy proceedings. This effect of judicial quality on the performance of re-organized firms was stronger when governors were politically popular. These findings are consistent with the view that politically strong governors subverted enforcement of the 1998 bankruptcy law.

Keywords: bankruptcy, capture, incentives, regional governments, Russia, transition

JEL Classification: D23, G33, H11, H77

Suggested Citation

Mogiliansky, Adriane Lambert and Sonin, Konstantin and Zhuravskaya, Ekaterina, Are Russian Commercial Courts Biased? Evidence from a Bankruptcy Law Transplant (December 25, 2006). Journal of Comparative Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=939032 or http://dx.doi.org/10.2139/ssrn.939032

Adriane Lambert Mogiliansky

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS)

28, rue des Saints-Peres
75007 Paris
France

New Economic School (NES)

100A Novaya Street
Moscow, Skolkovo 143026
Russia

Konstantin Sonin (Contact Author)

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Higher School of Economics ( email )

20 Myasnitskaya street
Moscow, 119017
Russia

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Ekaterina V. Zhuravskaya

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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