Courts in a Transition Economy: Case Disposition and the Quantity-Quality Tradeoff in Bulgaria

The lack of effective judiciary in post-socialist countries has been a pervasive concern and successful judicial reform an elusive goal. Yet to date, little empirical research exists on the functioning of courts in the post-socialist world. We draw on a new court-level panel dataset from Bulgaria to study the determinants of court case disposition and to evaluate whether judicial decision-making is subject to a quantity-quality tradeoff. Addressing endogeneity concerns, we find that case disposition in Bulgarian courts is largely driven by demand for court services. The number of serving judges, a key court resource, matters to a limited extent only in a subsample of courts, a result suggesting that judges adjust their productivity based on the number of judges serving at a court. We do not find evidence implying that increasing court productivity would decrease adjudicatory quality. We discuss the policy implications of our findings

Promoting Rule Compliance and Good Governance Practice

The paper re-examines the concerns on the rule-based governance in poor institutional environment. By relying on the theories and research vehicles of social psychology, we show that under certain conditions, the ‘law on books’ may still play role in governing market transactions, even though no formal enforcement applies. We furthermore expose the potential of the Corporate Governance Code as the ‘signaling device’ and provide arguments as to why this potential may be even stronger in an environment with relatively weak institutions in comparison to the developed market economies

Inside Post-Socialist Courts: The Determinants of Adjudicatory Outcomes in Slovenian Commercial Disputes

Despite the judiciary's central role in the capitalist market system, micro-level empirical analyses of courts in post-socialist countries are remarkably rare. This paper draws on a unique hand-collected dataset of commercial claims filed at Slovenian courts to examine the determinants of two salient adjudicatory outcomes: whether a case was resolved via trial or settlement and if the case was tried, whether the plaintiff was awarded the initial claim. Consistent with the divergent expectations theory of litigation, we find that trial-based resolution is more likely when the case is complex and less likely when parties use mediation. Addressing sample selection and endogeneity concerns, we show that defendant's legal representation, plaintiff's profitability, and, importantly, court identity are robust predictors of plaintiff victory at trial. Thus, more than two decades after the start of transition in Slovenia, the judicial system is still a source of legal inconsistency and uncertainty

Litigation and the Timing of Settlement: Evidence from Commercial Disputes

Although an overwhelming proportion of all legal disputes end in settlement, the determinants of the timing of settlement remain empirically underexplored. We draw on a novel dataset on the duration of commercial disputes in Slovenia to study how the timing of settlement is shaped by the stages and features of the litigation process. Using competing risk regression analysis, we find that events such as court-annexed mediation and the first court session, which enable the disputing parties to refine their respective expectations about the case outcome, in general reduce case duration to settlement. The magnitude of the respective effects, however, varies with time. Completion of subsequent court sessions, in contrast, does not affect the time to settlement. Judicial workload affects the timing of settlement indirectly, via the effect on the timing of the first court session. We also examine the effect of other case and party characteristics

Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

Insolvency systems play a crucial role in protection of creditor rights, yet micro-level empirical evidence on the functioning of insolvency regimes worldwide is sparse. We investigate whether creditors’ recovery of outstanding claims, a measure of ex-post efficiency of an insolvency regime, depends on the characteristics of the trustee delegated the administration of the liquidation proceedings. To this end, we draw on a novel dataset of firm liquidations from Slovenia and exploit courts’ de facto random assignment of firm liquidation cases to licensed liquidation trustees. Using a wide range of specifications and controls, we find that a subset of trustee characteristics indeed matters for debt recovery. Thus, ex-post efficiency of an insolvency regime depends not only on its formal rules and procedures, but also on who implements them in practice

What do the European Judges Strive for - An Empirical Assessment

Caseload backlogs and the quality of judicial decision-making have attracted worldwide scholarly attention for quite some time. The puzzle lies in explaining the observed persistence of backlogs alongside the quest for improvement in judicial decision-making. This is especially true since many countries, while trying to cope with this challenging issue, continue to enact regulatory provisions to seemingly improve the judiciary. The principal and agent theory suggests that the incentives of the agent (courts) and the principal (citizens) are going to be aligned under certain circumstances. This article analyzes the incentive mechanisms of continental judicial administration in view of traditional principal-agent theory and provides additional insights into the current legal, behavioral and economic discussion. Specifically, the article analyzes whether the current incentives for judges are in line with theoretical predictions. If one takes for granted that the European-continental judicial systems can be treated as bureaucratic systems, then discussion should, apart from judicial salary increases, focus upon interpretation of the observed differences in evaluation of judges in different countries, and upon the main incentives for judges’ good performance and promotion. This article offers a multidisciplinary analysis of current European and most recent Finnish guidelines on effectiveness and quality of judicial administration, and provides a law and economics assessment of proposed guidelines. Moreover, the identified multiplication effect of sticks in judiciary setting offer an additional argument for cautious application or even complete abolishment of such an inducement mechanism.- By Katarina Zajc and Mitja Kova