Assessing the Value of Law in Transition Economies

Transcription

1 Assessing the Value of Law in Transition Economies

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3 Assessing the Value of Law in Transition Economies Edited by Peter Murrell Ann Arbor

4 Copyright by the University of Michigan 2000 All rights reserved Published in the United States of America by The University of Michigan Press Manufactured in the United States of America Printed on acid-free paper No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, or otherwise, without the written permission of the publisher. A CIP catalog record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Assessing the value of law in transition economies / edited by Peter Murrell. p. cm. Includes bibliographical references and index. ISBN (cloth : alk. paper) ISBN X (paper : alk. paper) 1. Law and economic development. 2. Law Economic aspects. 3. Post-communism Economic aspects. I. Murrell, Peter, 1950 K3820.A dc

5 To Mancur Olson, destroyer of myths, creator of fundamental ideas, institution builder

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7 Contents List of Figures ix List of Tables xi Acknowledgments xv 1. Assessing the Value of Law in Transition Economies: An Introduction 1 Cynthia Clement and Peter Murrell 2. Beyond the Tip of the Iceberg: Business Disputes in Russia 20 Kathryn Hendley 3. Law Works in Russia: The Role of Law in Interenterprise Transactions 56 Kathryn Hendley, Peter Murrell, and Randi Ryterman 4. The Experience of Foreign Litigants in Russia s Commercial Courts 94 Glenn P. Hendrix 5. Misgovernance or Misperception? Law and Finance in Central Asia 133 Young Lee and Patrick Meagher 6. Does Legal Reform Protect Economic Transactions? Commercial Disputes in China 180 Minxin Pei 7. Business Networks in Transition Economies: Norms, Contracts, and Legal Institutions 211 Raja Kali 8. Keeping Shop: The Value of the Rule of Law in Warsaw and Moscow 229 Timothy Frye 9. Law as a Determinant for Equity Market Development: The Experience of Transition Economies 249 Katharina Pistor 10. A Property Theory Perspective on Russian Enterprise Reform 288 Michael A. Heller

8 viii Contents 11. Does Russian Legal Reform Matter? Evidence from Crude Oil Export Allocations 314 Daniel Berkowitz 12. Legal Initiatives in Russian Regions: Determinants and Effects 330 Leonid Polishchuk Contributors 369 Index 371

9 Figures 5.1. Investment for new product by finance source Different modality of borrowing by sources Percentage of contract without each provision Frequency of use of contract enforcement mechanism for customer nonpayment problem Effectiveness of contract enforcement mechanism for customer nonpayment problem Obstacles to using arbitrazh courts Efficiency gain with network 217

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11 Tables 3.1. Confidence in Institutions Perceptions of Honesty and Ethical Standards in Various Professions Perceptions of the Incidence of Violent Crime Comparisons of the Seriousness of Problems from Litigation and Crime Effectiveness of Dispute-Resolving Methods in Russia: Private Enforcement versus Arbitrazh Courts How the Purchasing Department Deals with Problems with Suppliers Analysis of Transactions: Variable Definitions and Summary Statistics Factors Explaining the Degree of Success on Transactions: Ordered Probit Regressions Foreign-Party Cases Plaintiff Statistics by Region Defendant Statistics by Region Foreign-Party Cases in the Circuit Courts SAC Foreign/Non-CIS Party Cases 112 A4.1. Supreme Arbitrazh Court Decisions in Cases with Non-CIS Foreign Parties, January 1997 September Summary Statistics and Construction of Variables, Kyrgyz Enterprise Data Some Patterns of Financing Behavior, OLS Some Patterns of Arrears Occurrence, OLS Correlation among Contract Enforcement Mechanisms and Contract Formality Some Patterns of Contract Enforcement Mechanisms Some Patterns of Enterprise Perception of Legal Environment and Some Related Behavior, OLS 169

12 xii Tables 6.1. Pieces of Legislation (laws and resolutions issued by the Central Government of the PRC, ) NCP Legislative Output, Growth of Litigation, (accepted cases in courts of first instance) Number of Commercial Disputes Resolved through Domestic Arbitration Committees, The Monetary Value of Claims of Commercial Disputes, Number of Commercial Disputes Accepted for Trial in Courts of First Instance by Region, Breakdown of Contract-Related Lawsuits (accepted cases in courts of first instances) Rate of Enforcement, Disposition of Appeals in Commercial Disputes, (by percentage) Outcome of Supervised Trials in Economic Cases, Disposition of Economic Cases in Courts of First Instance, (by percentage) Types of Cases in the Sample Regional Distribution of the Sample Types of Litigants in the Sample Outcome of Litigation in the Sample Home-Court Advantage? Effective Relief Rate in Adjudicated Cases in the Sample Effective Relief Rate in Settled Cases in the Sample Descriptive Statistics of the Shops The Regulatory Environment The Legal Environment Enforcement of Property Rights: The Police Investment and the Police Reinvestment Decisions Investment and Private Protection Rackets Interaction between Ownership Structure and Legal Rules Chronology of Legal Reform, Privatization, and Opening of Stock Exchange ECM Shareholder Property Rights in Transition Economies 267

13 Tables xiii 9.4. Investor Protection Rules in Transition Economies Comparing Shareholder Property Rights, Investor Protection, and Trading Rules in Transition Economies Stock Market Perception Data 275 A9.1. Stock Market Indicators for Transition Economies, A9.2. East European Companies on Local and Foreign Stock Exchanges (nominal values) 280 A9.3. East European Companies on Local and Foreign (German) Stock Exchanges (foreign exchange as share of local exchange) Russian Crude Oil Prices Export Routes and Capacity Utilization Correlation Coefficients for Instrumental Variables Export Equation Export Share Equation Price Controls Subsidies Centralization of Regional Budgets Privatization Newly Introduced Regional Sales Taxes 356

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15 Acknowledgments Mancur Olson had a great influence on me, not only during the 1990s in my involvement with the University of Maryland s IRIS Center, but throughout my career as a professional economist. He was a master teacher, humor-filled navigational aid through organizational mazes, and mentor on matters of research. But most of all, he was a model intellectual, always choosing the most important problems, whatever their difficulty, and never being content with easy solutions. My hope is that, in some modest way, this book, which Mancur helped to bring into being, lives up to Mancur s criteria for a worthwhile intellectual endeavor. Chas Cadwell, director of the IRIS Center, has offered encouragement and support in innumerable ways. With his constant insistence that aid projects cannot be successful unless they are supported by the insights that come from rigorous research, Chas has fostered a climate that has helped to build IRIS s unique reputation and to make IRIS an integral element of a research university. My hope is that the contributions in this book repay Chas s enormous efforts. Many people at the IRIS Center contributed to this book, but most important was Cindy Clement who, with great aplomb and humor, dealt with scholars who cannot read s and bureaucrats who write too many. Without Cindy, the ideas that led to this book would have been poorer and the organization necessary to produce it would have been absent. Heather Cameron worked with skill and energy to make sure the project got under way and the conference happened; Sarah Bell provided the same qualities in ensuring that the project was completed and that the book appeared. Within IRIS, the following people also provided helpful assistance at crucial times: Omar Azfar, Kimberly Brickell, Amy Denkenberger, Tony Lanyi, Jeff Livingston, Michael Metcalf, Diana Rutherford, and Dennis Wood. At the conference where the papers were first presented, commentators provided extremely insightful advice to the contributors. The essays appearing here are that much better for the efforts of Cliff Gaddy, Marcel Fafchamps, Jim Feinerman, Kenneth Koford, William Kovacic, Rick Messick, Vedat Milor, Francesca Recanatini, and Malcolm Russell-Einhorn. This publication was made possible through support provided by the U.S.

16 xvi Acknowledgments Agency for International Development, under Cooperative Agreement No. DHR-0015-A to the Center for Institutional Reform and the Informal Sector (IRIS) and administered by the Office of Economic and Institutional Reform, Center for Economic Growth, Bureau for Global Programs, Field Support and Research. The views and analyses in the report do not necessarily reflect the official position of the IRIS Center or USAID.