Financial Structure and Economic Development : Firm, Industry, and Country Evidence
The authors explore the relationship
between financial structure - the degree to which a
financial system is market- or bank-based - and economic
development. They use three methodologies: 1) The
cross-country approach uses cross-country data to assess
whether economies grow faster with market- or bank-based
systems. 2) The industry approach uses a country-industry
panel to assess whether industries that depend heavily on
external financing grow faster in market- or ban-based
financial systems, and whether financial structure
influences the rate at which new firms are created. 3) The
firm-level approach uses firm-level data across a broad
selection of countries to test whether firms are more likely
to grow beyond the rate predicted by internal resources, and
short-term borrowings in market- or bank-based financial
systems. The cross-country regressions, the industry panel
estimations, and the firm-level analyses, provide remarkably
consistent conclusions: a) Financial structure is not an
analytically useful way to distinguish financial systems. b)
Financial structure does not help us understand economic
growth, industrial performance, or firm expansion. c) The
results are inconsistent with both market-based and
bank-based views. In other words, economies do not grow
faster, industries dependent on external financing do not
expand faster, new firms are not created more easily,
firms' access to external finance is not greater, and,
firms do not grow faster in either market- or bank-based
financial systems. The authors find overwhelming evidence
that the overall level of financial development, and the
legal environment in which financial intermediaries, and
markets operate, critically influence economic development.
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Bibliographic Details
| Main Authors: |
Levine, Ross,
Beck, Thorsten,
Maksimovic, Vojislav,
Demirguc-Kunt, Asli |
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| Language: | English
en_US |
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| Published: |
World Bank, Washington, DC
2000-08
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| Subjects: | ACCOUNTING STANDARDS,
ACCOUNTING SYSTEMS,
ANNUAL GROWTH,
ANNUAL GROWTH RATE,
AVERAGE DATA,
BANK CREDIT,
BANKING SECTOR,
BANKING SYSTEM,
BANKS,
BLACK MARKET,
BLACK MARKET PREMIUM,
BUREAUCRATIC EFFICIENCY,
CAPITAL ACCUMULATION,
CAPITALIZATION,
CIVIL LAW,
COMMON LAW,
CONTRACT ENFORCEMENT,
CORPORATE PROFITS,
CORRUPTION,
COUNTRY CHARACTERISTICS,
COUNTRY COMPARISONS,
COUNTRY DATA,
COUNTRY LEVEL,
COUNTRY REGRESSIONS,
CROSS-COUNTRY EVIDENCE,
CROSS-COUNTRY SAMPLE,
DESCRIPTIVE STATISTICS,
DEVELOPMENT INDICATORS,
DEVELOPMENT RESEARCH,
DIVERSIFICATION,
ECONOMIC ACTIVITY,
ECONOMIC DEVELOPMENT,
ECONOMIC GROWTH,
ECONOMIC PERFORMANCE,
ECONOMIC THEORY,
ERROR TERM,
ERROR TERMS,
EXPLANATORY VARIABLES,
EXPORTS,
FINANCIAL DEVELOPMENT,
FINANCIAL SECTOR,
FINANCIAL SECTORS,
FINANCIAL SERVICES,
FINANCIAL STRUCTURE,
FINANCIAL SYSTEM,
FINANCIAL SYSTEMS,
GDP,
GROWTH DETERMINANTS,
GROWTH RATE,
GROWTH RATES,
GROWTH REGRESSION,
GROWTH REGRESSIONS,
INCOME,
INCOME COUNTRIES,
INEFFICIENCY,
INFLATION,
INFLATION RATE,
LARGE SHAREHOLDERS,
LAWS,
LEGAL ORIGIN,
LEGAL PROTECTION,
LEGAL SYSTEM,
LEGAL SYSTEMS,
LIBERTIES,
LIQUIDATION,
LIQUIDITY,
LONG-RUN GROWTH,
MACROECONOMIC STABILITY,
MARKET CAPITALIZATION,
NATIONAL OUTPUT,
0 HYPOTHESIS,
OVERHEAD COSTS,
POLICY MAKERS,
POLICY RESEARCH,
PRIVATE SECTOR,
PRODUCTIVITY,
PRODUCTIVITY GROWTH,
REORGANIZATION,
RESOURCE ALLOCATION,
REVERSE CAUSALITY,
RISK MANAGEMENT,
RULE OF LAW,
SAVINGS,
SAVINGS RATES,
SHAREHOLDERS,
STOCK PRICES, |
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| Online Access: | http://documents.worldbank.org/curated/en/2000/08/693232/financial-structure-economic-development-firm-industry-country-evidence
https://hdl.handle.net/10986/19809
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