Abstract/Details

The link between judicial quality and economic outcomes: Micro-level evidence from India


2005 2005

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Abstract (summary)

This dissertation investigates the effects of legal reform that facilitated the recovery of non-performing loans by banks in India.

Chapter 1 and 2 study a new institution known as Debt Recovery Tribunals (DRTs), tribunals which follow a new streamlined legal procedure to process legal suits filed by banks against defaulting borrowers. In Chapter 1, I describe the background against which DRTs were established and the pattern of DRT establishment, and present a simple theoretical model to explain their expected effects. In Chapter 2, I present empirical evidence using two alternate data sets. The methodology relies on two aspects of the reform. One, different states in India received DRTs at different times. Two, DRTs are most useful for recovering long-term, secured loans. Specifically, only claims larger than Rupees 1 million (≈US$ 20,000) can be filed with DRTs. These two features allow a differences-in-differences strategy to identify the effects of DRTs. First, building on joint work with James Costantini, I use bank-level data. I find that for public sector banks, DRTs led to slower growth of non-performing loans. Next, I employ a more rigorous empirical strategy on loan-level data from a large bank with a national presence. I find that corporate borrowers are less likely to be delinquent in loan repayment if they are exposed to DRTs. Further, I find that new loans tend to be cheaper after DRTs are established.

Finally, in Chapter 3, I examine the effect of another legal reform affecting the Indian banking sector, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) law. Inter alia, this law allows banks to recover secured loans without a court order by directly by seizing collateral. I use bank-level stock price data to perform event studies on three different events relevants to the SARFAESI reform. For two of the three events studied, I find strong evidence of a positive effect on banks. I also examine patterns in the response of banks according to bank characteristics such as ownership, proportion of secured lending, and non-performing loans.

Indexing (details)


Subject
Economics;
Nonperforming loans;
Reforms;
Banking law;
Commercial credit;
Delinquency;
Default;
Studies
Classification
0501: Economics
Identifier / keyword
Social sciences; Economic outcomes; India; Judicial quality; Legal reform
Title
The link between judicial quality and economic outcomes: Micro-level evidence from India
Author
Visaria, Sujata
Number of pages
89
Publication year
2005
Degree date
2005
School code
0054
Source
DAI-A 66/07, Dissertation Abstracts International
Place of publication
Ann Arbor
Country of publication
United States
ISBN
9780542238949, 0542238942
Advisor
Dehejia, Rajeev; Urquiola, Miguel
University/institution
Columbia University
University location
United States -- New York
Degree
Ph.D.
Source type
Dissertations & Theses
Language
English
Document type
Dissertation/Thesis
Dissertation/thesis number
3182985
ProQuest document ID
305012467
Copyright
Database copyright ProQuest LLC; ProQuest does not claim copyright in the individual underlying works.
Document URL
http://search.proquest.com/docview/305012467
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