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Markets versus institutions in developing countries: National attributes as determinants

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  • Aggarwal, Raj
  • Goodell, John W.

Abstract

While there is some discussion of national preferences for banking versus financial markets, there is little research on how national financing preferences are determined by legal, cultural, and other national characteristics. Using panel analysis on data for a recent eight-year period for sixteen emerging-economies, this paper documents that, in such countries, an increased predilection for equity markets is associated with increased prevention of corruption and countries being Asian. A decreased predilection for financing via equity markets is associated both with greater power of bank regulators and with more globalization and an English legal origin. One interpretation of our results suggests that while common law promotes both banking and financial markets, common law and societal openness act to promote banking more than markets in less developed environments. Our results have important public policy implications given that financial systems are still evolving in developing countries.

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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 10 (2009)
Issue (Month): 1 (March)
Pages: 51-66

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Handle: RePEc:eee:ememar:v:10:y:2009:i:1:p:51-66

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Web page: http://www.elsevier.com/locate/inca/620356

Related research

Keywords: Financial institutions Banks Financial markets Universal banks Comparative financial systems Legal traditions Uncertainty avoidance Trust Property rights;

References

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Citations

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Cited by:
  1. Aggarwal, Raj & Goodell, John W., 2009. "Markets and institutions in financial intermediation: National characteristics as determinants," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1770-1780, October.
  2. Bhagat, Sanjai & Malhotra, Shavin & Zhu, PengCheng, 2011. "Emerging country cross-border acquisitions: Characteristics, acquirer returns and cross-sectional determinants," Emerging Markets Review, Elsevier, vol. 12(3), pages 250-271, September.
  3. Brian Lucey & Colm KEarney & Ciaran MacAnBhaird, . "Culture and capital structure in small and medium sized firms," The Institute for International Integration Studies Discussion Paper Series iiisdp419, IIIS.

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