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How Do Financial Systems Affect Economic Performance?

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Author Info
Wendy Carlin
Colin Mayer ()

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Abstract

This paper examines the relation between financial, corporate and legal systems, and economic performance in different countries. It reviews international comparisons that undertake detailed analyses of individual, developed countries and studies that use large, cross-country data banks, including developing countries. While the former do not provide evidence of a clear relation between different types of systems and economic performance, the latter report a strong association of financial development with economic growth. A recent theoretical literature offers a way of reconciling these two sets of studies. It points to a relation between financial/ corporate systems and types of activity with some systems favouring high risk, short-term investments and others promoting long-term, relatively low risk investments. These theories also suggest that systems may be related to stages of economic development. The paper summarizes a first empirical study that reports an association between financial/ corporate systems, types of activity and stages of economic development. The paper concludes that these relationships have important implications for the design of regulation and legal systems in different countries.

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Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 1999fe08.

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Date of creation: 1999
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Handle: RePEc:sbs:wpsefe:1999fe08

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June. [Downloadable!] (restricted)
    Other versions:
  2. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
    Other versions:
  3. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December. [Downloadable!] (restricted)
  4. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June. [Downloadable!] (restricted)
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  5. Franklin Allen, . "Stock Markets and Resource Allocation (Reprint 036)," Rodney L. White Center for Financial Research Working Papers 15-92, Wharton School Rodney L. White Center for Financial Research.
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  7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Agency Problems and Dividend Policies Around the World," Harvard Institute of Economic Research Working Papers 1839, Harvard - Institute of Economic Research.
    Other versions:
  8. Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Kaplan, Steven N, 1994. "Top Executive Rewards and Firm Performance: A Comparison of Japan and the United States," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 510-46, June. [Downloadable!] (restricted)
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  11. Franks, Julian R & Mayer, Colin, 2001. "Ownership and Control of German Corporations," CEPR Discussion Papers 2898, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December. [Downloadable!] (restricted)
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  16. Haizhou Huang & Chenggang Xu, 1999. "Institutions, Innovations, and Growth," IMF Working Papers 99/34, International Monetary Fund.
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  18. Becht, Marco & Roell, Ailsa, 1999. "Blockholdings in Europe:: An international comparison1," European Economic Review, Elsevier, vol. 43(4-6), pages 1049-1056, April. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mayer, Colin, 2001. "The Financing and Governance of New Technologies," CEI Working Paper Series 2001-11, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. O'Sullivan, Mary, 2003. "Recent Developments in the Financing Role of the Stock Market for French Corporations," EIFC - Technology and Finance Working Papers 36, United Nations University, Institute for New Technologies. [Downloadable!]
  3. Andrea Schertler, 2002. "Under What Conditions Do Venture Capital Markets Emerge?," Kiel Working Papers 1119, Kiel Institute for the World Economy. [Downloadable!]
  4. Dherment-Ferere, Isabelle & Köke, Jens & Renneboog, Luc, 2001. "Corporate monitoring by blockholders in Europe : empirical evidence of managerial disciplining in Belgium, France, Germany, and the UK," ZEW Discussion Papers 01-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Rivaud-Danset, Dorothée & Oheix, Valérie, 2005. "Do corporate financial patterns in European countries converge and testitfy for disintermediation?," MPRA Paper 40, University Library of Munich, Germany. [Downloadable!]
  6. Ettore Andreani & Doris Neuberger, 2004. "Relationship Finance by Banks and Non-Bank Institutional Investors: A Review within the Theory of the Firm," Thuenen-Series of Applied Economic Theory 46, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  7. Stoneman, Paul, 2001. "Financial Factors and the Inter Firm Diffusion of New Technology: A Real Options Model," EIFC - Technology and Finance Working Papers 8, United Nations University, Institute for New Technologies. [Downloadable!]
  8. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library. [Downloadable!]
  9. Ari Hyytinen & Mika Pajarinen, 2001. "Financial Systems and Venture Capital in Nordic Countries: A comparative Study," Discussion Papers 774, The Research Institute of the Finnish Economy. [Downloadable!]
  10. Stoneman, Paul, 2001. "Heterogeneity and Change in European Financial Environments," EIFC - Technology and Finance Working Papers 7, United Nations University, Institute for New Technologies. [Downloadable!]
  11. Gérard Charreaux, 2001. "Variation sur le thème 'A la recherche de nouvelles fondations pour la finance et la gouvernance d'entreprise'," Working Papers FARGO 011201, Université de Bourgogne - Latec/Fargo (Research center in Finance,organizational ARchitecture and GOvernance), revised Jul 2002. [Downloadable!]
    Other versions:
  12. António Afonso & Raquel Ferreira & Edmund Freitas & Celso Nóbrega & José Pinheiro, 2003. "Intermediaries, Financial Markets and Growth: Some more International Evidence," Working Papers 2003/02, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  13. Doris Neuberger, 2005. "What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm," Finance 0510001, EconWPA. [Downloadable!]
  14. Doris Neuberger, 2005. "What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm," Finance 0510003, EconWPA. [Downloadable!]
  15. Dhillon, Amrita & Rossetto, Silvia, 2009. "Corporate Control and Multiple Large Shareholders," The Warwick Economics Research Paper Series (TWERPS) 891, University of Warwick, Department of Economics. [Downloadable!]
  16. Doris Neuberger, 2005. "What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm," Finance 0503001, EconWPA. [Downloadable!]
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