Financial Structure, Creditor Rights and Economic Growth

The idea behind the new Dutch Bankruptcy Act is that it should reward risk-taking by entrepreneurs in order to stimulate innovative entrepreneurship. Therefore, the rights of the creditors may need to be adjusted in security at some level. Knowledge on the impact of creditor rights on entrepreneurial activity and on the impact of financial structure on economic growth is deemed necessary. Some recent studies analyse the effect of financial development, financial structure and legal instruments on economic growth. These studies reveal that financial development is important for economic growth, whereas the role of financial structure is unclear. Secured creditor rights were found to be associated with growth. However, the cross-country analyses include many underdeveloped countries and may suffer from other shortages. The present paper builds on the available studies, making the estimated relations more suitable to an environment appropriate to the Netherlands.