Taking advantage of a rich database of more than 1 million companies in Spain, France and the U.K., we propose and test a hypothesis to explain why Spain has one of the world's lowest business bankruptcy rates, even during the current economic crisis and after controlling for market exit rates....

The literature has found that the size of firms matters for innovation and productivity and, thus, for economic performance. It is therefore worth explaining why enterprises in Spain are small in international terms. Our findings indicate that the quality of the institutional environment plays a...

Small businesses, the majority of Spanish firms, rarely file for formal bankruptcy, and this has been the case even during the current economic crisis. This suggests that bankruptcy law has a limited role to play in the distress of small firms. We propose an explanation based on two premises:...

Investment decisions are generally irreversible and could be affected by holdup problems and opportunism. Thus, investment may need sound enforcement institutions. This paper analyzes firm level data to identify the impact of judicial system efficacy, as representative of the institutional...

A number of theoretical and empirical studies have shown that the development of credit markets is affected by the efficacy of enforcement institutions. A less explored question is how these institutions interact with turns in the economic cycle and the impact of different types of legal...

Entry of new firms, both in the form of entrepreneurs and corporations, fosters competition and productivity. The entry of firms and productivity have both been low in the Spanish economy over recent years. This paper analyses the determinants of entry focusing on the role of the design and...

Labor courts may introduce a significant wedge between “legal” firing costs and “effective” (post-trial) firing costs. Apart from procedural costs, there is uncertainty over judges' rulings, in particular over the likelihood of a “fair” dismissal ultimately being ruled as...

There is empirical evidence of a cross-country positive association between the number of lawyers per capita and the extent of litigation. For instance, Spain has more litigation and more lawyers per capita than most OECD countries. How should this association be interpreted? In this paper we...

Compared with the rest of the European countries the weight of the house property market in Spain is very high, which is consistent with the weakness of the tenancy market. In this context, it has often been argued that an inefficient judicial system, implying a cumbersome procedure to evict a...

The adoption of court fees has been traditionally justified as a means to improve the performance of enforcement institutions as they may have an effect of deterrence of the dispute. Judicial congestion has clear negative impacts on economic performance. Spain, which has one of the highest rates...