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Governance and financial development: A cross-country analysis

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  • Li, Jialong
  • Maung, Min
  • Wilson, Craig

Abstract

We provide a comprehensive cross-country analysis of financial development. We propose that anti-director rights (ADRs) and creditor rights could act in concert, or as substitutes, for the development of both equity and debt markets. For equity market development, we find mixed results regarding the effect of ADRs that are consistent with previous research. We also find some support that creditor rights have a positive influence on equity market development. For credit market development, we distinguish between credit provided by deposit-taking banks and that provided by non-bank financial institutions (NBFIs). Bank credit is mainly determined by creditor rights, whereas non-bank credit is mainly determined by anti-director rights. Results from ADRs and creditor rights suggest that NBFIs are more concerned with rights that protect investors from insider expropriation and are less concerned with rights that protect creditors when a firm is bankrupt.

Suggested Citation

  • Li, Jialong & Maung, Min & Wilson, Craig, 2018. "Governance and financial development: A cross-country analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 52(C), pages 227-239.
    • Handle: RePEc:eee:intfin:v:52:y:2018:i:c:p:227-239
    DOI: 10.1016/j.intfin.2017.09.020
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    More about this item

    Keywords

    Financial market development; Anti-director rights; Creditor rights; Legal origins;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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