Record Details

Does judicial quality matter for firm performance?

Philippine Review of Economics

View Archive Info
 
 
Field Value
 
Title Does judicial quality matter for firm performance?
 
Creator Agregado, Josemaria Gabriel V.; University of the Philippines School of Economics
Marella, Jose Maria; University of the Philippines School of Economics
University of the PHilippines College of Law
Monsod, Toby C.; University of the Philippines School of Economics
 
Subject new institutional economics, principal components analysis, firm growth, judiciary, corruption, bribery, Philippines
 
Description A sound legal environment is said to be good for business to the extent that it protects property rights, enforces contracts, and ensures the consistency of policies. By lowering uncertainty and contracting costs, a better judiciary is expected to encourage business investments. We test if this hypothesis holds in the Philippine setting by examining whether and how judicial quality is significant to firm-level growth. We construct a quantitative measure of judicial quality, a Judicial Quality Index, using principal components analysis on a diagnostic survey dataset of judges across 13 regions, and we use this in a regression analysis of firm-level growth using data from micro, small, and medium enterprises across 34 Philippine cities. We find that higher judicial quality has no independent effect on firm growth. But it does reduce the effect of “bribes” or informal payments, which are typically offered by firms to overcome inordinate delays in government processes or to gain an advantage in business. It therefore makes a positive but indirect contribution to firm performance. In the presence of a better quality judicial system, there is a less compelling need for firms to engage in informal payments to “grease the wheels of commerce”. JEL classification: C38, C36, D02, D73
 
Publisher Philippine Review of Economics
 
Contributor —
 
Date 2015-06-22
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/917
 
Source Philippine Review of Economics; Vol 52, No 1 (2015); 77-94
1655-1516
 
Language eng
 
Relation http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/917/816
 
Rights Copyright (c) 2017 Philippine Review of Economics