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  3. American Economic Review
  4. December 2002
  5. Property Rights and Finance

Property Rights and Finance

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Abstract

Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.

Citation

Johnson, Simon, John McMillan, and Christopher Woodruff. 2002. "Property Rights and Finance ." American Economic Review, 92 (5): 1335-1356. DOI: 10.1257/000282802762024539

JEL Classification

  • P23 Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population
  • P34 Socialist Institutions and Their Transitions: Financial Economics
  • D23 Organizational Behavior; Transaction Costs; Property Rights
  • M13 New Firms; Startups
  • P31 Socialist Enterprises and Their Transitions