Neither Robin Hood Nor King John: Testing the Anti-Creditor and Anti-Debtor Bias in Brazilian Judges

Abstract

When judges are believed to be politically biased and judicial decisions are considered to be unpredictable, many nasty consequences may derive from it. The economic literature in Brazil shows some controversies over what is the direction of the bias, but mainly, economists believe that courts tend to favor debtors, leading to high disincentives for investment decisions and credit granting. Oddly, this controversial debate has never been accompanied by empirical data. The main objective of this paper is to test the hypotheses of political bias and uncertainty in Brazilian courts. A population of 1,687 decisions of the STJ (Superior Tribunal de Justica, one of the highest level courts in the country) over private debts was analyzed case by case, and the variables were regressed in a logit model. Results indicate that judges in the higher courts very frequently change the decisions made in lower courts, which may suggest high unpredictability in the Brazilian Judiciary. On the other hand, the existence of judicial bias, in any direction, was not confirmed by the data.