Law and Firms' Access to Finance

This article examines how a country’s legal origin influencesthe operation of its financial system by using firm-level surveydata across a broad cross-section of countries on the obstaclesthat firms face in raising external finance. Using panel regressions,the article assesses two channels through which legal originmay influence the financial system. We find that the adaptabilityof a country’s legal system is more important for explainingthe obstacles that firms face in accessing external financethan the political independence of the judiciary.