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Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?

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Thorsten Beck
Ross Levine

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Abstract

Are market-based or bank-based financial systems better at financing the expansion of industries that depend heavily on external finance, facilitating the formation of new establishments, and improving the efficiency of capital allocation across industries? We find evidence for neither the market-based nor the bank-based hypothesis. While legal system efficiency and overall financial development boost industry growth, new establishment formation, and efficient capital allocation, having a bank-based or market-based system per se does not seem to matter much.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8982.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:8982

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G0 - Financial Economics - - General
K2 - Law and Economics - - Regulation and Business Law

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