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Capital Market Regimes and Bank Structure in Europe

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Author Info
Ronald E. Shrieves (University of Tennessee)
Drew Dahl () (Department of Economics and Finance, Utah State University)
Michael F. Spivey (Clemson University)

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Abstract

We hypothesize that features of European capital markets used to distinguish market reliance and investor protection have predictably influenced emerging national differences in bank capitalization, growth, and choice of income-producing activities. We characterize countries' capital regimes as more or less "equity-friendly" or "debt-friendly" based upon their reliance on equity and credit markets and the extent to which their legal frameworks protect shareholders and creditors. Using bank-level data from 13 European countries, 1998 to 2004, we find evidence of positive associations between equity-friendly market features and, respectively, bank capitalization, bank asset growth and the relative emphasis on bank lending to its customers. Support is also provided for hypotheses that credit-friendly capital regimes convey advantages reflected in higher rates of growth in assets and greater emphasis on lending to customers. Our results suggests that integration of European banking markets is mitigated by other, relatively static, features of the equity and debt markets on which banks rely.

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File URL: ftp://repec.bus.usu.edu/RePEc/uth/wpaper/DEFWP2008-07.pdf
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Publisher Info
Paper provided by Utah State University, Department of Economics and Finance in its series Working Papers with number 200807.

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Length: 42 pages
Date of creation: 14 Jan 2009
Date of revision:
Handle: RePEc:uth:wpaper:200807

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Related research
Keywords: international banking; market integration; shareholder protection;

Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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