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...

Complex or poorly drafted regulations are more difficult for economic agents to implement, eroding economic efficiency. The literature has so far concentrated on the analysis of regulatory complexity as a phenomenon related to the “quantity” of norms. Regulation can also be complex because...