Private Credit in 129 Countries

Authors: Simeon Djankov, Caralee McLiesh and Andrei Shleifer
Source: Journal of Financial Economics, May 2007

We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. We find that both creditor protection through the legal system and information sharing institutions are associated with higher ratios of private credit to GDP, but that the former is relatively more important in the richer countries. An analysis of legal reforms also shows that credit rises after improvements in creditor rights and in information sharing. We also find that creditor rights are remarkably stable over time, contrary to the hypothesis that legal rules are converging. Finally, we find that legal origins are an important determinant of both creditor rights and information sharing institutions. The analysis suggests that public credit registries, which are primarily a feature of French civil law countries, benefit private credit markets in developing countries.

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