Are Fast Court Proceedings Good or Bad ? : Evidence from Japanese Household Panel Data

We analyze the effect of the degree of judicial enforcement on the probability of credit constraints, the amount of loan and the probability of default. Contrary to the traditional view on judicial efficiency of credit market, our estimation results show that better judicial enforcement increases the probability of being rationed and decreases credit granted by banks, consistent with laziness effects. In order to confirm the laziness effect more directly, we analyzed the effect of the degree of judicial enforcement on the probability of default and found that better judicial enforcement increases the probability of default, as expected.