This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. December 2002
  5. Property Rights and Finance

Property Rights and Finance

  • Simon Johnson
  • John McMillan
  • Christopher Woodruff
American Economic Review
vol. 92, no. 5, December 2002
(pp. 1335-1356)
Download Full Text PDF

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