Journal Article

Creditor Protection and Credit Response to Shocks

Arturo José Galindo and Alejandro Micco

in The World Bank Economic Review

Volume 21, issue 3, pages 413-438
Published in print October 2007 | ISSN: 0258-6770
Published online October 2007 | e-ISSN: 1564-698X | DOI:
Creditor Protection and Credit Response to Shocks

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  • Corporate Governance
  • Bankruptcy
  • Law and Economics


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This article studies the relationship between creditor protection and credit responses to macroeconomic shocks. Using a data set on legal determinants of finance in a panel of data on aggregate credit growth for 79 countries during 1990–2004, it is shown that credit is more responsive to external shocks in countries with weak legal creditor protection and weak enforcement. The results are statistically and economically significant and robust to alternative measures of creditor protection, to the inclusion of variables that reflect different stages of economic development, to the restriction of the sample to only developing economies, to the controls for systemic crises, to alternative shock measures, and to vector autoregressive specifications.

Keywords: G31; G33; K2

Journal Article.  8087 words.  Illustrated.

Subjects: Corporate Governance ; Bankruptcy ; Law and Economics

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