ann kathrin
tennis是什么意思Bank-Bad or Market-Bad Financial Systems:
Which is Better?mnemosyne
weila
Ross Levine
Finance Department
Carlson School of Management
suit什么意思
University of Minnesota
网络营销学校January 2000
英文蔬菜歌Abstract: For over a century, economists and policy makers have debated the relative merits of bank-bad versus market-bad financial systems. Recently, however, proponents of the legal-bad view of financial development have argued that the century long debate concerning bank-bad versus market-bad financial systems is analytically vacuous. According to this view, the critical issue is establishing a legal environment in which both banks and markets can operate effectively. This paper reprents the first broad, cross-country examination of which view of financial structure and economic growth is most consistent with the data.
lention
* Email: rlevine@csom.umn.edu. I completed work on this paper while visiting the Banco Central de Chile, which provided a very stimulating rearch environment. Thorsten Beck, Maria Carkovic, Asli Demirguc-Kunt, Norman Loayza, and minar participants at the Banco Central de Chile provided helpful comments.
I.Introduction
For over a century, economists and policy makers have debated the relative merits of bank-bad versus market-bad financial systems. At the clo of the 19th century, German economists argued that their bank-centered financial system had helped propel Germany past the market-centered United Kingdom as an industrial power [Goldsmith 1969]. During the 20th century this debate expanded to include Japan, as a major bank-bad economy, and the United States, as the quintesntial market-bad system. Indeed, less than a decade ago, many obrvers claimed that Japan’s bank-bad financial system would catapult it past the United States as the world’s foremost economic power [e.g., Vogel 1979; and Porter 1992]. Although Japan’s recent troubles have pushed this particular example from center stage, policy makers and economists around the globe continue to analyze the relative merits of bank-bad versus market-bad financial systems [e.g., Allen and Gale 1999].
Implicit in the bank-bad versus market-bad debate is the notion of a tradeoff. Two unfamiliar disciplines, corporate finance and development economics, can each be ud to provide the analytical basis for this tradeoff view. Many development economists argue that investment is the key to growth and readily note that much more corporate finance is raid from banks than from equity sales even in the most developed markets.1 This view produces a pessimistic asssment of the role of markets compared to banks in fostering growth. Moreover, many development economists note that markets can destabilize economies with negative ramifications on development. Thus, traditional development economics focus on banks and views stock markets as unimportant – and perhaps dangerous -- sideshows. In turn, traditional corporate finance theory views debt and equity – and through this prism, banks and equity北京德语培训机构
markets – as substitute sources of finance [Modigliani and Miller 1958]. Corporate finance and development economics, therefore, may give little positive role to markets or view banks and markets as competing components of the financial system.
There may not exist a tradeoff between banks and markets according to the financial rvices view of the finance-growth nexus. Levine (1997) and others stress that financial arrangements – contracts, markets, and intermediaries – ari to provide key financial rvices. Specifically, financial
systems asss potential investment opportunities, exert corporate control after funding projects, facilitate risk management, including liquidity risk, and ea savings mobilization. By providing the financial rvices more or less effectively, different financial systems promote economic growth to a greater or lesr degree. According to this “financial rvices view,” the issue is not banks or markets. The issue is creating an environment in which banks and markets provide sound financial rvices. The financial rvices view is not necessarily inconsistent with either bank-bad or market-bad financial systems being particularly effective at providing financial rvices at particular stages of economic development. Nevertheless, the financial rvices view places the analytical spotlight on how to create better functioning banks and markets, and relegates the bank-bad versus market-bad debate to the shadows.
The legal-bad view of financial structure -- espoud by Laporta, Lopez-de-Silanes, Shleifer, and Vishny (henceforth LLSV, 1997, 1998, 1999) – extends the financial rvices view and unconditionally rejects the bank-bad versus market-bad debate. The legal-bad view argues that finance is a t of contracts. The contracts are defined – and made more or less effective – by legal rights and enforcement mechanisms. From this perspective, a well-
1 For discussion of development economics and its erroneous stress on capital accumulation, e E
asterly and Levine (1999). For evidence on corporate finance around the globe, e Mayer (1980).
functioning legal system facilitates the operation of both markets and intermediaries. It is the overall level and quality of financial rvices – as determined by the legal system – that improves the efficient allocation of resources and economic growth. According to the legal-bad view, the century long debate concerning bank-bad versus market-bad financial systems is analytically vacuous. Fortunately, recently compiled data allows us to analyze the different hypothes on financial structure and growth.
The purpo of this paper is to evaluate which view of financial structure and economic growth is most consistent with international experience. Besides the bank-bad and market-bad views, I examine the financial rvices view along with its extension: the legal-bad approach. The bank-bad view stress the importance of financial intermediation in ameliorating information asymmetries and intertemporal transaction costs. According to this view, bank-bad financial systems – especially in countries at early stages of economic development – are better than market-bad financial systems at promoting economic growth. The market-bad view stress the importance of well-functioning curities markets in providing incentives for investors to acquire information, impo corporate control, and custom design financial arrangements. According to the
market-bad view, market-bad financial systems are better at promoting long-run economic growth than more bank-bad financial systems. The financial rvices view does not conceptually reject the bank-bad versus market-bad debate. Rather, it emphasizes that both banks and markets can provide financial rvices that foster economic growth. The legal-bad view rejects the bank- versus market-bad distinction. It stress that the legal system plays the pivotal role in determining the provision of growth-promoting financial rvices.
Besides resolving theoretical debates, providing empirical evidence on financial structure will help in formulating growth-enhancing public policies. If the evidence supports either the bank-bad or market-bad views of financial structure and growth, then policy makers can focus on implementing policies to encourage the development of a particular financial structure. Toward this end, Demirguc-Kunt and Levine (1999) provide evidence on the legal, tax, and policy determinants of financial structure. If the evidence rejects the bank-bad and market-bad approaches and supports the financial rvices approach to financial structure, then policy makers should focus more on improving the functioning of both banks and markets. More specifically, evidence supporting the legal-bad view of financial structure and growth would highlight the importance of strengthening the rights of investors and improving the efficiency of contract enforcement. Thus, empirically disting
uishing the merits of the competing views of financial structure and growth has critical policy implications.
Past studies of financial structure and growth have tended to focus on a few industrialized countries. Indeed, the historical focus has been on Germany, Japan, the United Kingdom, and the United States.2 Ca-studies construct country-specific measures of financial structure. Thus, studies of Germany commonly focus on the extent to which banks own shares or vote proxy shares; studies of Japan frequently focus on whether a company has a “main bank;” while, studies of the United States sometimes on the role of market takeovers as corporate control devices. The country-specific measures are very uful; however, they are difficult to u in a broad cross-country analysis. Also, there is a major shortcoming with existing comparisons of market-bad versus bank-bad financial systems: they focus on a very narrow t of countries with similar levels of GDP per capita, so that the countries have very similar long-run growth
rates. Thus, if one accepts that Germany and Japan are “bank-bad” and that the United Kingdom and the United States are “market-bad,” then this implies that financial structure did not matter much since the four countries have similar long-run growth rates.3 To provide greater information on both the economic importance and determinants of financial structure, economists need to broaden t
he debate to include a wider array of national experiences.
This paper reprents the first broad, cross-country examination of financial structure and economic growth.4 One advantage of the broad cross-country approach is that it permits a consistent treatment of financial system structure across many countries. I u the new datat constructed by Beck, Demirguc-Kunt, and Levine (1999). We constructed this data from individual country sources and more standard databas. The datat measures the size, activity, and efficiency of various components of the financial system, including banks, curities markets, and nonbank financial intermediaries for a wide assortment of developed and developing countries. While recognizing that broad cross-country comparisons come at the cost of less preci measures of financial structure, this paper provides the first consistent appraisal of financial structure and economic performance in the international cross-ction of countries.
The results are overwhelming. There is no cross-country empirical support for either the market-bad or bank-bad views. Neither bank-bad nor market-bad financial systems are particularly effective at promoting growth. This conclusion is not altered when examining countries at different levels of economic development. Similarly this conclusion is not altered
2 For an enlightening review of the literature on financial structure, e Allen and Gale (1999). Also, e Chirinko and Elston (1999), Edwards and Fischer’s (1994) book, along with the review by Gorton 1995. The Black and Moersch (1998b) volume contains very worthwhile rearch.
3 While other differences (e.g., fiscal, monetary, and regulatory policies) could have perfectly balanced the growth effects of differences in financial structure, this ems unlikely. Also, past studies of financial structure do not control for differences in non-financial ctor policies.
修理英文
4 Black and Moersch (1998a) start down this path, but they do not have sufficient data to conduct the analys on a diver t of countries.
