How Do Financial Systems Affect Economic Performance?
AbstractThis 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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Bibliographic InfoPaper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 1999fe08.
Date of creation: 1999
Date of revision:
Other versions of this item:
- Colin Mayer & Wendy Carlin, 1999. "How Do Financial Systems Affect Economic Performance?," Economics Series Working Papers 1999-FE-08, University of Oxford, Department of Economics.
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- G3 - Financial Economics - - Corporate Finance and Governance
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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