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Bank stock returns and economic growth

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Author Info
Cole, Rebel
Moshirian, Fari
Wu, Qionbing

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Abstract

Previous research has established (i) that a country’s financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets, we find a positive and significant relationship between bank stock returns and future GDP growth that is independent of the previously documented relationship between market index returns and economic growth. We also find that much of the informational content of bank stock returns is captured by country-specific and institutional characteristics, such as bank-accounting-disclosure standards, banking crises, enforcement of insider trading law and government ownership of banks.

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File URL: http://mpra.ub.uni-muenchen.de/4714/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4714.

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Date of creation: 01 Aug 2007
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Handle: RePEc:pra:mprapa:4714

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Related research
Keywords: Banks Economic Growth Emerging Markets Financial Development

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Find related papers by JEL classification:
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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