What Firms Know
Mohammad Amin, The World Bank, May 2008Abstract A large literature shows that the legal tradition of a country is highly correlated with various dimensions of institutional quality. Broadly, studies show that English common law countries perform better than the French civil law countries with respect to the regulatory burden on firms, efficiency of courts and contract enforcement, corruption, and overall governance. This paper adds to the literature by showing another aspect of institutional development that conforms to the same pattern. That is, the ease with which information on laws and regulations is available to firms is superior in common law compared with civil law countries. Roughly, one-third of this difference can be explained by differences in the level of business regulations across the two legal traditions. Among other factors, the authors find that larger firms and smaller countries report much better availability of information than their respective counterparts. The authors provide some plausible reasons for these findings.
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