Judicial Quality Research Articles

Impact of CEO foreign experience on corporate environmental violations: The role of enhanced environmental ethics and general competency

This study examined the relationship between CEO foreign experience and corporate environmental violations using data from heavy-polluting China-listed firms. The impact of CEO foreign experience on corporate environmental violations remains underexplored. Existing studies primarily examine managerial foreign experience in corporate environmentally responsible behavior, relying on firms' voluntary disclosure or third-party agencies’ evaluations. However, data on corporate environmental violations issued by governments is more reliable. Our findings indicate firms led by CEOs with foreign experience exhibited less likelihood and frequency of environmental violations. The negative correlation was more pronounced when firms were under weaker institutional pressure from central and local governments, poor environmental judicial quality, and adequate public participation. Enhanced environmental ethics and general competency are potential mechanisms through which CEO foreign experience affects corporate environmental behavior. The findings highlight the significance of CEO foreign experience in shaping corporate environmental violations, providing essential policy implications for emerging market stakeholders.

Does legal justice promote stakeholder justice? Evidence from a judicial reform in China

This paper investigates how judicial quality affects corporate social responsibility (CSR) performance. Employing a difference-in-differences model based on the establishment of circuit courts in China and a sample of Chinese A-share listed firms from 2010 to 2020, we find that enhanced judicial quality improves firms' CSR performance. Further analysis shows that CSR helps reduce the incidence and expense of lawsuits and financial constraints arising after the circuit court establishment and mitigates negative market responses toward lawsuit announcements. This suggests that CSR has strategic value against lawsuits and firms' incentives to reduce litigation costs, financial constraints, and adverse market reactions are the potential mechanisms. The effect of judicial quality on CSR performance is more pronounced for firms with greater ex-ante litigation risk, lower ex-ante CSR awareness, and close to circuit courts. Overall, this study highlights a novel externality of the judiciary and suggests that legal justice can promote stakeholder justice.

Role of behind-the-border factors in determining state-level differences in FDI inflows to India

PurposeAlthough India is seen as a key player in the global economy, it is still below its potential level of growth. In this age of globalism, integration with the global economy through trade and foreign investments fosters domestic growth. For India, although this integration has strengthened over the years, there are certain gaps that remain to be addressed. Though numerous studies in the literature have tried to find answers to these questions, an important aspect that has not been considered by these studies relates to India’s federal structure and the role of states in determining the aggregate economic outcome. As Foreign Direct Investment (FDI) inflows to India are concentrated in a few states, this paper aims to provide an assessment of the reasons behind this trend.Design/methodology/approachThis paper aims to investigate the reasons behind the interstate differences with respect to FDI inflows in India. The analytical work undertaken for this paper is based on secondary data, collected and collated from various sources. The approach adopted for this paper includes a heat graph analysis to examine whether there is a clear pattern in terms of the state-specific factors for high FDI states versus the low FDI states. This data analysis is followed by an econometric estimation to gauge the impact of state-specific factors in determining the FDI inflows.FindingsAs per the secondary data–driven heat graph and econometric analysis, factors like industrial output, social sector expenditure, judicial quality, connectivity indicators, labor cost and availability of credit, act as differentiators between high and low FDI-receiving states. It then becomes imperative to bridge the gap between the two sets of states in terms of these specific factors. Implementation and success of policy interventions can only be derived at the state level and therefore needs more decentralized approach.Originality/valueThis paper tries to identify the reasons that are responsible for FDI inflows being concentrated in a few Indian states. This involves a comprehensive analysis of several variables to understand whether there is a clear pattern where high-FDI states are also in a better position with respect to these attributes. This effort to factor in the federal aspect of a macroeconomic indicator like FDI provides new dynamic to this area of work.

The quality of judicial decisions in cases of bullying in professional educational institutions

The positions of scholars on the concept of “judicial decision quality” have been examined. Criteria for a high-quality judicial decision include justice, timeliness, justification, clarity, clear language, and an accessible style. The researchers also distinguish between objective (legal training, legal experience, qualification requirements for judicial candidates, opportunities for practicing judges to improve their skills, mechanisms for monitoring the work of judges, unrestricted public access to judicial decisions, the role of legal science in analysing judicial decisions) and subjective (the judge’s personality, salary, social guarantees, working conditions and ability to organise their work) factors that affect the quality of a judicial decision. The summaries of judicial practice and analytical work on the application of the Supreme Court’s legislation focus on the following requirements for the quality of drafting and execution of court decisions in cases on administrative offences: execution of a judicial decision with strict compliance by the court with the requirements established by law to its form and content, compliance with the legislation on the language of legal proceedings.
 Normative legal acts aimed at developing a unified approach to understanding the quality of judicial decisions have been analysed. Requirements for determining the quality of a judicial decisiont are considered in the Conclusion of the Advisory Council of European Judges No. 11 (2008) on the quality of judicial decisions, including external environment – legislation and economic and social context (legislation, resources, actors in the judicial system and legal education), internal environment - professionalism, procedural rules, case consideration and decision-making (professionalism of the judge, procedural rules and case management, case consideration in court, elements inextricably linked to decision-making).
 Judicial decisions in cases of bullying in vocational education institutions adopted in accordance with the provisions of the Code of Ukraine on Administrative Offences are considered with regard to the presence or absence of requirements for the quality of judicial decisions. It has been established that a certain number of judgements do not have the components of judicial quality.
 Shortcomings of the current legislation on administrative offences have been highlighted. In particular, the outdated provisions of the Code of Ukraine on Administrative Offences; the absence of an article that would provide for the adoption of rulings by courts in the name of Ukraine in cases of administrative offences, etc.
 The article analyses the judicial decisions made by courts in the period from 2019 to 2021 in cases on administrative offences involving bullying of participants in the educational process in vocational education institutions in terms of their clarity (comprehensibility) and validity. It has been highlighted that most judicial decisions contain an exhaustive list of evidence in the case; the courts comply with the requirement to find out whether an administrative offence has been committed, whether the person is guilty of committing it, whether he or she is subject to administrative liability, etc..

Can social insurance contributions boost labor share?—Evidence from China’s social insurance law

Improving the factor income distribution is a crucial issue in the field of income inequality. Using large-scale data from China’s National Tax Survey from 2008 to 2016, this paper examines the impact of the implementation of the Social Insurance Law on firms’ labor share and its mechanisms. The results show that the Social Insurance Law significantly reduces firms’ labor share. Although it increases the firms’ social insurance rate and total amount of social insurance contributions, firms respond by reducing the number of employed labors and net wages to mitigate rising labor costs, as well as adopting alternative technological advancement patterns and capital deepening behavior, leading to a reduction in labor share. The weakening effects of Social Insurance Law primarily exist in non-SOEs, and MSEs, and firms faced with higher financial constraints and located in lower judicial quality areas. Our study suggests that stronger social security collection could account for the decline in labor share worldwide.

Suing the government under weak rule of law: Evidence from administrative litigation reform in China

There is a long-standing debate in the literature about the effectiveness of strengthening judicial independence in developing countries with weak rule of law. This paper exploits a recent Chinese judicial reform in administrative litigation, which changed the jurisdiction rule from intra-regional to trans-regional, to estimate the effects of improved judicial independence on protecting private entities against potential abuses of public authority. We find a significant increase in the probability of successfully suing local governments after the reform, especially when the defendants are more powerful government departments and when the plaintiffs are individual citizens with fewer legal resources than firms. But this effect is more limited for higher-level governments. The reform also results in increased case filings, prolonged trial time, and enhanced judicial quality. In addition, it raises the awareness of both governments and citizens about the rule of law, increases firm entry, and worsens general public attitudes toward local governments, at least in the short term. Our study highlights trans-regional jurisdiction as a new source of judicial independence in a party state and its potential limitations.

Judicial independence and corporate innovation: Evidence from the establishment of circuit courts

This study explores the effects of judicial independence on corporate innovation by analyzing the staggered establishment of Circuit Courts in China. We find that introducing Circuit Courts increases corporate innovation, particularly for central state-owned enterprises and private firms. Channel analysis shows that Circuit Courts significantly reduce local judicial protectionism, ease financial constraints, and improve corporate governance, which stimulates innovation. The positive effects of Circuit Courts are more pronounced in cities facing severe political intervention, regions with weak legal environments, and private firms without political or banking connections. Our results are robust to endogeneity concerns, alternative measures and specification models. Overall, this study supports the theoretical arguments that institutions matter and that improvements in judicial quality boost firms' incentives to innovate.

How to achieve emission reduction without hindering economic growth? The role of judicial quality

Existing literature has carried out fruitful research on the effects of environmental regulation policies. Due to differences in policies, regions, and data analysis methods, however, the previous studies have not reached a consensus on the effects of environmental regulation policies, especially on the effects of environmental regulation policies of developing countries from the perspective of environmental justice. This paper takes the establishment of the environmental court in China's intermediate people's court as a quasi-natural experiment and uses the multi-period difference-in-differences method to examine the effect of the establishment of the environmental court on environmental governance and economic performance, based on the panel data of 284 cities in China from 2003 to 2019. The results show that the establishment of the environmental court can significantly reduce the emission intensity of industrial SO2 in the short term. This reduction effect is resulted from the joint emission reduction effect of the establishment of the environmental court on local cities and adjacent cities. The mechanism analysis shows that the establishment of the environmental court has the dual effect of emission reduction without hindering economic growth. This effect is mainly achieved by improving energy efficiency, stimulating green technology innovation, increasing environmental investment, and improving the green finance level. Furthermore, the emission reduction effect of the establishment of the environmental court shows differential effects under the constraints of regional rule-of-law level, environmental awareness, fiscal pressure, and level of innovation and entrepreneurship. In addition, the establishment of the environmental court can facilitate the achievement of carbon peaking and carbon neutrality goals.

Determinants of corporate governance compliance: what matters and what does not?

PurposeThe objective of this study is to assess the level of corporate governance (CG) compliance and identify determinants of high compliance in Indonesian publicly listed corporations including family and nonfamily firms. The country uses a voluntary disclosure approach to enforce its regulations; thus, it is important to identify the factors affecting compliance.Design/methodology/approachEmploying a logistic regression model, this paper analyzes the CG index of high-compliance vs. poor-compliance companies and emphasizes factors that contribute to better governance compliance. The CG index of high-compliant firms is almost twice as high as that of low-compliant firms.FindingsThe study explores factors that contribute to high CG in an emerging market like Indonesian corporations. The study's findings indicate that family-owned businesses predominate in the low-compliance group. High-compliance firms are older and larger with higher financial performance, free float and leverage, as well as a positive influence of the founder's great leadership. The results support theoretical arguments that concentrated ownership and excessive majority shareholder control are key factors in determining the likelihood of good governance practices by firms. Hence, the market and regulators should devise effective strategies to encourage and reward high compliance.Research limitations/implicationsThe findings of the research offer several implications for the academic community and policymakers. Improving CG at the firm level is a viable goal, even though the agenda to reform minority investor protection laws and increase judicial quality is challenging and may take a long time to show significant results. Moreover, this study has some limitations that could be addressed in future research. The study focuses on a single-country setting, Indonesia. There are cultural aspects and governance settings that may be unique in the Indonesian context, which may limit the applicability of the findings to other countries with their own cultural settings and institutional legal framework.Originality/valueThe study investigates the factors that influence high governance compliance in specific CG regulations designed for the emerging Indonesian market. The study also discovers evidence that the crisis period has a favorable impact on the firm's decision to comply with governance provisions.

Judicial Quality, Input Customisation, and Trade Margins: The Role of Product Quality

Abstract We study how the contracting environment affects the quality of trade. A better contracting environment not only induces specialisations in industries intensively using customised inputs, but also causes quality upgrading of domestic varieties and tougher competition in these industries. We incorporate these effects into a Ricardian model with customised input and product quality. Our model predicts that better judicial quality raises a country’s import prices and quality more in contract-intensive products, but has no impacts on its export prices or quality. We empirically confirm these predictions and find that rising judicial quality is associated with increasing specialisations in contract-intensive industries.

Economic policy uncertainty, hold-up risk and vertical integration: Evidence from China

Firm behavior in the presence of policy uncertainty has been a focal point of research in recent years. We examine a sample of Chinese mergers from 2005 to 2018 and find that economic policy uncertainty has a significantly positive impact on firms' propensity to engage in vertical mergers relative to other types of mergers. We apply the incomplete contract theory to explain this effect, using relationship concentration to represent relationship specificity, we find the effect is stronger for firms with a high relationship concentration and in regions with poor judicial quality. We find that this effect is more pronounced for risk-averse firms. The results remain robust in several robustness checks. The results are consistent with incomplete contract theory and demonstrate that policy uncertainty increases hold-up risk between upstream and downstream traders, causing firms to choose vertical integration to alleviate the increased transaction costs caused by policy uncertainty.

Is justice delayed justice denied? An empirical approach

Improving judicial performance in order to enhance the business environment has been a policy goal for many governments in the last decades. Following the suggestions of several international organizations, most countries have tried to speed up their case resolution systems by streamlining judicial procedure. However, not as much attention has been devoted to test the potential drawbacks of similar reforms in terms of supplying a quicker but yet qualitatively inferior justice, thus contradicting the well-known legal maxim justice delayed is justice denied. The present work wishes to contribute to the empirical literature on the topic by proposing two alternative ways to further disentangle the relationship between judicial performance and judicial quality. Exploiting a dataset of 171 countries for the 2003–2016 time period, we find statistically significant evidence of a strong and negative relationship between courts’ delay and countries’ quality of the justice. While the intrinsic limits of this kind of institutional empirical analysis suggest caution when interpreting our estimates as proof of causality, we present more robust evidence suggesting that countries characterized by faster judiciaries seem to be equally not affected by a deterioration of the quality of justice, thus confirming the aforementioned maxim, at least descriptively.

Equity incentive schemes, investor protection and corporate performance

Purpose On the basis of corporate governance and agency cost theory, using the fifth sub-indicator of Fan et al. China Marketization Index as the regional investor protection index (IPI), the purpose of this paper is to explore the impact of equity incentives and regional investor protection on corporate payout policies and corporate performance. Design/methodology/approach This paper establishes ordinary least squares regression model to examine interactions between the effects of equity incentives and regional investor protection upon firms’ dividend payouts. In addition, the authors also explore whether the joint effects on payouts are altered in the presence of growth opportunities, and investigate the effects of interactions between equity incentives and regional investor protection on corporate performance. Findings The authors observe that firm managers appear to abuse equity incentives by increasing dividend payouts. However, regional investor protection can potentially restrain such behavior. The restraining effect depends on the firms’ growth opportunities, on the basis of which the effect on cash (stock) dividends is found to be weaker (stronger) in high-growth firms – and stronger (weaker) in low-growth firms. Further evidence indicates that the restraining effect of regional investor protection on selfish dividend-related behavior encouraged by equity incentives may also prove valuable in encouraging exploitation of these incentives so as to enhance corporate performance. Practical implications Since reforming investor protection laws and improving judicial quality are difficult and lengthy at a country level. Improving regional levels of investor protection, however, seems more feasible and effective. Through measures encouraging the development of intermediaries, increases in the number of lawyers – all of which seem likely to constrain behavior harmful to the interests of investors – the provincial administrations can reasonably expect to contribute toward improvements in the performance of firms and the development of the economy in their region. This paper provides encouragement to regional policy makers in China and in other developing countries. Originality/value This paper uses a regional index of investor protection to study the impact on corporate dividends and performance, in contrast with most previous studies, which have examined these issues at country or individual firm levels. The use of a regional-level investor IPI in this paper therefore fills a gap by coming in between the country- and firm-level indicators typically used in previous research, thus providing a new perspective on investor protection issues.

Quality of judicial institutions, crimes, misdemeanors, and dishonesty

We investigate the extent to which quality of judicial institutions has an impact on individuals’ propensity for criminal and dishonest behavior and on their views regarding the acceptability of dishonesty and law-breaking. We use micro data on residents of 25 European countries and employ alternative measures of judicial quality as perceived by the residents of these countries. As an instrument for judicial quality we employ the procedures with which prosecutors and judges are appointed to their posts in each country. As alternative instruments, we employ an index of de jure institutional quality as well as its components, which provide similar results. The findings show that an increase in the perception of the quality of judicial institutions, such as an improvement in judicial independence or the impartiality of the courts, has a deterrent effect on dishonest and criminal acts. A higher perceived quality of the judicial system also makes individuals less likely to find acceptable a variety of dishonest and illicit behaviors, suggesting that institutions help shape the beliefs of the society. We obtain the same results when we analyze the sample of immigrants, whose cultural attributes should be (more) related to their countries of origin, rather than their countries of residence, and thus should be arguably uncorrelated with the factors that can impact the instrument. We show that people’s beliefs in the importance of the family, in the fairness of others, and the importance of being rich are not impacted by judicial quality, suggesting that judicial quality is not a blanket representation of underlying cultural norms and beliefs in the society.

Judicial retirement age - putting the rationale on record

Professor Stephen Hardy (Coventry University law School) describes the rationale and role of regulation behind the retirement age for members of the judiciary. He argues that it is in the public interest that senior judges of proven judicial quality are appointed and retained in the appellate courts and suggests that a diverse judiciary through a more progressive appointments policy alongside more judicial career development and/or succession planning would certainly resolve the current concerns.

Funding the Judiciary: How Budgeting System Shapes Justice. A Comparative Analysis of Three Case Studies.

Based on three case studies (Finland, France and The Netherlands), this article describes the performance-based budgeting models in place in the judiciaries of the three countries, and their effects (positive and negative) on the courts’ functioning. This article represent a first attempt to analyse the impact of funding mechanisms on judicial independence, accountability, efficiency and quality.

The Independence of Judges Reduced Legal Development in England, 1600-1800

Conventional wisdom on English development confers iconic status on the clause of the Act of Settlement (1701) that mandated secure tenure for judges. Because the Act's effect on tenure was partial, the effect of tenure on judicial decisions can be identified. The paper estimates how the awarding of tenure changed the number of citations to judges' decisions, a measure of judicial quality. The empirics uses two new databases, one on judges' biographies and one recording citations in the English Reports to earlier decisions. Several strategies aid identification. A court-year panel permits difference-in-differences. Controls capture judges' human capital and the importance of litigation. Instrumental-variable estimates use judge life-expectancy and political vicissitudes as instruments. Tenure has a strong, significant, and deleterious effect on the quality of associate-judge decisions. Tenure has no effect for chief judges. The Act of Settlement reduces citations by 20% in the 18th century. The results are interpretable in terms of the incentives provided by a powerful legal profession that could protect vulnerable judges in a politically volatile era.

Relationship-specificity, incomplete contracts, and the pattern of trade: A comment on the role of natural resources

In his seminal paper, Nunn (2007) finds that countries with good contract enforcement have a comparative advantage and, therefore, specialize in exporting goods for which relationship-specific investments are most important. We argue that this result cannot be extrapolated to all industries: there is substantial heterogeneity regarding the effect of contract enforcement on exports. In particular, we empirically demonstrate that there is a disconnection between judicial quality and exporting in relationship-specific natural resource related industries. Due to the lack of input factor mobility, for such industries, the quality of contract enforcement cannot explain the pattern of trade, but rather other factors that are widely discussed in the literature. We discuss some relevant implications of this disconnection between judicial quality and relationship-specific industries in terms of the natural resource curse and the impact of natural resources trade on economic development.

FROM HONEYMOON TO DIVORCE: INSTITUTION QUALITY AND FOREIGN INVESTORS' OWNERSHIP CONSOLIDATION IN CHINA

In China, joint ventures (JVs) between foreign investors and Chinese local firms were the most popular form of foreign affiliates before 2001. Over time, with policy space to operate as foreign wholly owned (WOs), many foreign investors in JVs chose to consolidate ownership and turned JVs into their WOs. Here, we examine how institution quality affects foreign investors' JV‐to‐WO ownership consolidation odds. For each province‐year, we construct an institution quality index from the business and judicial quality indicators, and further compute a relative quality index to highlight provincial variations. Using more than 43,000 JVs operating in China's 30 provinces over 1998–2007, we find that increases in institution quality decrease the odds of foreign investors to divorce their Chinese local partners. The odds for foreign investors in JVs to consolidate ownerships are significantly higher if they operate in provinces with relatively weaker institution quality. The odds of foreign investors' JV‐to‐WO decision vary with JVs' local firms being state‐owned enterprises (SOEs) and non‐SOEs, with foreign investors' origins from Hong Kong, Macao, and Taiwan (HMT) and other regions (Foreign), and with foreign investors' initial equity positions. Our results are not driven by foreign direct investment policy shocks, and are robust to alternative measures of institution quality. (JEL F23, L23)

Determinants of Judicial Efficiency Change: Evidence from Brazil

AbstractJudicial efficiency matters for economic development. Nevertheless, the determinants of judicial productivity growth are not entirely understood. Using data of Brazil's state courts for the period of 2009 to 2014, this paper analyzes judicial productivity change and its possible determinants over time in a two stage approach. First, data envelopment analysis is used to calculate Malmquist productivity measures which are decomposed in: technical change (frontier-shift effect) and efficiency change (composed of pure efficiency change and scale efficiency change). In the second stage, fixed effect models are estimated to evaluate the associated factors with judicial productivity growth. The first stage results show a slight improvement in judicial productivity trend, which is defined mainly by efficiency change, since technical change deteriorated in the period. The second stage findings suggest the nonexistence of a trade-off between judicial quality and efficiency improvement. Moreover, judges’ remuneration, legal complexity and technological use are correlated with judicial productivity, however not always in the expected direction.