American Economic Review Vol. 92 No. 5 2002

Property Rights and Finance

Simon Johnson¹; John McMillan²; Christopher Woodruff³

¹ Sloan School of Management, MIT, 50 Memorial Drive, Cambridge, MA 02142 · ² Graduate School of Business, Stanford University, 518 Memorial Way, Stanford CA 94305. · ³ Graduate School of International Relations and Pacific Studies, University of California-San Diego, La Jolla, CA 92093.

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.

DOI

10.1257/000282802762024539

Volume

92

Issue

5

Pages

1335-1356

Language

en

Sources

crossref bibtex:phds-export.bib openalex

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓