New Firm Formation and Industry Growth : Does Having a Market- or Bank-Based System Matter?

New Firm Formation and Industry Growth : Does Having a Market- or Bank-Based System Matter?

The authors find no evidence for the superiority of either market-based or bank-based financial systems for industries dependent on external financing. But they find overwhelming evidence that industries heavily dependent on external finance grow faster in economies with higher levels of financial development, and with better legal protection for outside investors - including strong creditor and shareholder rights and strong contract enforcement mechanisms. Financial development also stimulates the establishment of new firms, which is consistent with the Schumpeterian view of creative destruction. Financial development matters. That the financial system is bank-based on market-based offers little additional information.

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Bibliographic Details
Main Authors: Levine, Ross, Beck, Thorsten
Language:English
en_US
Published: World Bank, Washington, DC 2000-06
Subjects:ACCOUNTING STANDARDS, ANNUAL GROWTH, ANNUAL GROWTH RATE, BANK CREDIT, BANKING SECTOR, BANKS, BOARDS OF DIRECTORS, CAPITAL ACCUMULATION, CAPITAL EXPENDITURES, CAPITALIZATION, CASH FLOWS, CIVIL LAW, COMMON LAW, COMPARATIVE ADVANTAGE, COMPARATIVE ADVANTAGES, CONTRACT ENFORCEMENT, CORPORATE PROFITS, COUNTRY DATA, COUNTRY GROWTH REGRESSIONS, COUNTRY VARIATION, DEBT, DEPENDENT VARIABLE, DESCRIPTIVE STATISTICS, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, EMPIRICAL RESULTS, ENTREPRENEURSHIP, EXTERNAL FINANCE, FINANCIAL DEVELOPMENT, FINANCIAL INTERMEDIARIES, FINANCIAL INTERMEDIATION, FINANCIAL MARKETS, FINANCIAL SECTOR, FINANCIAL SECTOR DEVELOPMENT, FINANCIAL SERVICES, FINANCIAL STRUCTURE, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FINANCIAL TRANSACTIONS, GDP, GROSS DOMESTIC PRODUCT, GROWTH RATE, GROWTH RATES, INCOME, INDEPENDENT VARIABLES, INSTITUTIONAL DEVELOPMENT, LARGE SHAREHOLDERS, LEGAL ORIGIN, LEGAL SYSTEMS, LIQUID MARKETS, LIQUIDATION, LIQUIDITY, MARKET CAPITALIZATION, NATIONAL OUTPUT, NEGATIVE SIGN, POLICY RESEARCH, PRIVATE CREDIT, PRIVATE SECTOR, REORGANIZATION, RESOURCE ALLOCATION, REVERSE CAUSALITY, RULE OF LAW, SECTOR ACTIVITY, SHAREHOLDERS, SIGNIFICANT IMPACT, STOCK MARKET, STOCK MARKETS, STOCK PRICES, TAKEOVER, TRANSACTION COSTS, TRANSACTIONS COSTS, VALUE ADDED,
Online Access:http://documents.worldbank.org/curated/en/2000/06/437118/new-firm-formation-industry-growth-having-market--or-bank-based-system-matter
https://hdl.handle.net/10986/19840
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