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Institutional quality, governance, and financial development

  • Siong Law


  • W. Azman-Saini

Using banking sector and stock market development indicators, we examine the effect of institutional quality on financial development in developed and developing countries. Empirical results are based on dynamic system generalized method of moments estimations and demonstrate that a high-quality institutional environment is important in explaining financial development, specifically for the banking sector. However, the stock market development-institution relationship is contingent one, characterized by a non-monotonic pattern. The results are robust to two measurements of institutions and governance indicators, as well as estimation methods. Copyright Springer-Verlag 2012

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Article provided by Springer in its journal Economics of Governance.

Volume (Year): 13 (2012)
Issue (Month): 3 (September)
Pages: 217-236

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Handle: RePEc:spr:ecogov:v:13:y:2012:i:3:p:217-236
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