New firm formation and industry growth - does having a market- or bank-based system matter?

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New firm formation and industry growth - does having a market- or bank-based system matter?, Volume 1

Author:	Beck, Thorsten; Levine, Ross;	Collection Title:	Policy, Research working paper ; no. WPS 2383
Date Stored:	2000/08/14	Document Date:	2000/06/30
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	Finance	Report Number:	WPS2383
Sub Sectors:	Financial Sector Development	SubTopics:	Achieving Shared Growth; Governance Indicators; Payment Systems & Infrastructure; Economic Theory & Research; Banks & Banking Reform; Fiscal & Monetary Policy; Decentralization; Financial Economics
Volume No:	1

Summary: The authors find no evidence for the superiority of either market-based or bank-based financial systems for industries dependent on external financing. But they find overwhelming evidence that industries heavily dependent on external finance grow faster in economies with higher levels of financial development, and with better legal protection for outside investors - including strong creditor and shareholder rights and strong contract enforcement mechanisms. Financial development also stimulates the establishment of new firms, which is consistent with the Schumpeterian view of creative destruction. Financial development matters. That the financial system is bank-based on market-based offers little additional information.


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	PDF 44 pages	WPS2383	0.13

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