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Legal System Efficiency, Information Production, and Technological Choice: A Banking Model

Author

Listed:
  • Davide IACOVONI

    ([n.a.])

  • Alberto ZAZZARO

    (Universit… Politecnica delle Marche, Dipartimento di Economia)

Abstract
Recent empirical studies have shown that the structure of the legal system and the efficiency in law enforcement influence the financial structure of the firm, their ability to gain access to capital markets, and the growth rate of economic systems. This paper uses a simple banking model with ex-ante and ex-post information asymmetries between borrowers and lenders to analyse the effects that the efficiency of the legal system may exert on the credit market. Its main conclusious are: (i) an efficient legal system reduces loan interest rates and, in the majority of the cases, the average amount of defaults on loans; (ii) an improvement in the efficiency of legal institutions improves banks' selection procedures only provided the efficiency of the legal system is already high.

Suggested Citation

  • Davide IACOVONI & Alberto ZAZZARO, 2000. "Legal System Efficiency, Information Production, and Technological Choice: A Banking Model," Working Papers 129, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    • Handle: RePEc:anc:wpaper:129
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    References listed on IDEAS

    as
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    Cited by:

    1. Alberto Zazzaro, 2005. "Should Courts Enforce Credit Contracts Strictly?," Economic Journal, Royal Economic Society, vol. 115(500), pages 166-184, January.
    2. Stefania BUSSOLETTI & Roberto ESPOSTI, 2004. "Regional Convergence, Structural Funds and the Role of Agricolture in the EU. A Panel-Data Approach," Working Papers 220, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Ugo FRATESI, 2003. "Innovation Diffusion and the Evolution of Regional Disparities," Working Papers 186, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Nicola MATTEUCCI & Alessandro STERLACCHINI, 2003. "ICT and Employment Growth in Italian Industries," Working Papers 193, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    5. Egli, Dominik & Ongena, Steven & Smith, David C., 2006. "On the sequencing of projects, reputation building, and relationship finance," Finance Research Letters, Elsevier, vol. 3(1), pages 23-39, March.
    6. Marcello MESSORI & Alberto ZAZZARO, 2004. "Monetary profits within the circuit: Ponzi finance oer "mors tua, vita mea"?," Working Papers 200, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Elvio MATTIOLI, 2003. "The measurement of coherence in the evaluation of criteria and its effects or ranking problems illustrated using a multicriteria decision method," Working Papers 199, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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    More about this item

    Keywords

    Judicial enforcement of laws; information production; stochastic debt contracts;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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