Are Bond Markets and Bank Credits Complementary or Substitutable?Evidence from the Rule of Law and Legal Origin

Bond issuances and bank lending coexist despite being financed by the same debt. This study investigates whether rule of law influences bond issuance and bank lending preferences. Using three regression models, we find that the rule of law strength varies according to legal origin in each country. The relationship between rule of law and bond issuance divided by bank lending (or, Bond/Bank) is largely negative, especially for common-law backgrounds. The relationship between GDP per capita and Bond/Bank is positive for English legal origin and negative for the Scandinavian one. Therefore, legal origins contribute to the varieties of capitalism