Financial development,institutions and banks

This paper presents a framework for understanding the interactions between political and legal institutions, property rights protection, and their implications for financial development. Whereas the literature has answered questions on why some countries lag behind in terms of financial and economic development, the current study suggests how to get around some institutional attributes to spearhead financial intermediation and economic growth through a set of institutional, information, and banking reforms. It finds little support that common law legal heritage is more suitable than French civil law for some key features of financial development. It concludes that types of institutional and market reforms are more relevant to financial intermediation than legal systems. It proposes some ways forward to increase financial intermediation; and expects, over the long run, the proposed approach to financial development to be beneficial for a number of developing countries.     

Financial structure,informality and development

The impact of capital market imperfections and costs of creating and operating formal sector firms on total factor productivity is studied. We propose a firm dynamics model with endogenous formal and informal sectors where firms face a technology adoption opportunity. The model predicts that countries with a low degree of debt enforcement and high costs of formality are characterized by low allocative efficiency and large output shares produced by low productivity, informal sector firms. For frictions parametrized using the Doing Business database, the model generates a drop in total factor productivity of up to 25% relative to the US.     

Financial literacy,present bias and alternative mortgage products

Choosing a mortgage is one of the most important financial decisions made by a household. Financial innovation has given rise to more complex mortgage products with back-loaded payments, known as ‘Alternative Mortgage Products’ (AMPs), or ‘Interest-Only Mortgages’. Using a specially designed question module in a representative survey of UK mortgage holders, we investigate the effect of consumer financial sophistication on the decision to choose an AMP instead of a standard repayment mortgage. We show poor financial literacy and present bias raise the likelihood of choosing an AMP. Financially literate individuals are also more likely to choose an Adjustable Rate Mortgage (ARM), suggesting they avoid paying the term premium of a fixed rate mortgage.     

Financial development,financial structure,and domestic investment: International evidence

Does it matter for domestic investment whether a country's financial system is bank-based or stock-market based? This paper posits that financial intermediation affects domestic investment notably by alleviating financing constraints, allowing firms to increase investment in response to increased demand for output. The key result is that the structure of the financial system has no independent effect on investment, in the sense that it does not enhance the response of investment to changes in output, while financial development makes investment more responsive to output growth. Consequently, rather than promoting a particular type of financial structure, countries should implement policies that reduce transactions costs in financial intermediation and enforce creditor and investor rights. This will facilitate the development of banks and stock markets, which will stimulate domestic investment.     

4月28日国务院常务会议指出 深化金融改革 保持经济平稳较快发展

国务院总理温家宝4月28日主持召开国务院常务会议,审议并原则通过“关于2010年深化经济体制改革重点工作的意见》。     

Financial development and innovation: Cross-country evidence

We examine how financial market development affects technological innovation. Using a large data set that includes 32 developed and emerging countries and a fixed effects identification strategy, we identify economic mechanisms through which the development of equity markets and credit markets affects technological innovation. We show that industries that are more dependent on external finance and that are more high-tech intensive exhibit a disproportionally higher innovation level in countries with better developed equity markets. However, the development of credit markets appears to discourage innovation in industries with these characteristics. Our paper provides new insights into the real effects of financial market development on the economy.     

金融创新：鼓励发展金融控股公司

2008年新一届政府在金融领域工作重心很有可能将会转移到一直强调的“金融创新”和2006年就已开始的金融业综合经营试点工作上来,在这种背景下,作为金融业综合经营的最主要模式之一的金融控股公司,将通过自身快速发展来有力地推动金融创新     

Financial development,bank discrimination and trade credit

Non-state owned firms in China grow tremendously with limited support from banks. This provides a unique setting to test how firms in a country with poorly developed financial institutions fund their prosperous growth opportunities. This paper compares the use of an important non-formal financial channel, trade credit, between state and non-state owned firms in China. We find that, compared to state owned firms, non-state owned firms use more trade credit. We further show that this higher usage is primarily for financing rather than transactional purposes. The results suggest that, in a country with a poorly developed formal financial sector, firms can support their growth through non-formal financial channels that largely rely on implicit contractual relation.     

Financial liberalization,bureaucratic corruption and economic development

We study the effect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalization which, at the same time, raises efficiency in capital production. Our main results may be summarized as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalization is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may coexist as permanent, rather than just transitory, fixtures of an economy.     

金融自助服务：全面发展 不断创新

自助设备在减轻银行柜台服务压力的同时,也成为银行重要的服务渠道,已快速深入到广大公众的生活和工作中。未来,商业银行在加强运营管理、保障自助设备安全外,也要注重丰富自助设备的服务功能、拓宽业务范围,以促进自助服务更快更好的发展。     

Robustness and sensitivity analysis of risk measurement procedures

Measuring the risk of a financial portfolio involves two steps: estimating the loss distribution of the portfolio from available observations and computing a ‘risk measure’ that summarizes the risk of the portfolio. We define the notion of ‘risk measurement procedure’, which includes both of these steps, and introduce a rigorous framework for studying the robustness of risk measurement procedures and their sensitivity to changes in the data set. Our results point to a conflict between the subadditivity and robustness of risk measurement procedures and show that the same risk measure may exhibit quite different sensitivities depending on the estimation procedure used. Our results illustrate, in particular, that using recently proposed risk measures such as CVaR/expected shortfall leads to a less robust risk measurement procedure than historical Value-at-Risk. We also propose alternative risk measurement procedures that possess the robustness property.     

Financial Regulations,Financial Literacy,and Financial Inclusion: Insights from Kenya

This paper examines the relationship between financial regulation and financial inclusion in Kenya. Employing Probit regression on cross-sectional household level survey data and fixed effect regression on banks panel data, we find that: (i) agency banking regulations and financial literacy could improve formal financial access, and (ii) know-your-customers rules and capital and liquidity macro-prudential regulations could harm financial inclusion. Results are robust to alternative specifications. Given our findings, Kenya should boost financial literacy efforts, relax customer identification requirements in specific instances where they may jeopardize financial inclusion efforts, and stabilize macroeconomic environment to mitigate unintended adverse effects of macro-prudential regulations.     

Dividend yields and expected stock returns: alternative procedures for inference and measurement

Alternative ways of conducting inference and measurement forlong-horizon forecasting are explored with an application todividend yields as predictors of stock returns. Monte Carloanalysis indicates that the Hansen and Hodrick (1980) procedureis biased at long horizons, but the alternatives perform better.These include an estimator derived under the null hypothesisas in Richardson and Smith (1991), a reformulation of the regressionas Jegadeesh (1990), and a vector autoregression (VAR) as inCampbell and Shiller (1988), Kandel and Stambaugh (1988), andCampbell (1991). The statistical properties of long-horizonstatistics generated from the VAR indicate interesting patternsin expected stock returns.     

Financial literacy,financial development,and leverage of small firms

This study examines the relationship between financial literacy and the leverage of small firms, specifically of the legal forms, sole proprietorships, and partnerships. Using a cross-section of 73,302 firms in 22 countries, we find that the leverage of small firms is negatively associated with financial literacy. Further, we explore the role of financial development, bankruptcy and transaction costs, and information asymmetry, in moderating the relationship. We find that the negative relationship is less pronounced in countries with lower financial development, high bankruptcy and transaction costs, and high information asymmetry environments, respectively. We contribute to the understanding of small firms' leverage and the literature on financial literacy, SMEs, finance, and entrepreneurship. This study offers policy implications for economies that promote SMEs for entrepreneurship training and development.     

Financial development and reserve requirements

Many countries have either eliminated or considerably reduced reserve requirements during the last decade. This paper derives the optimal reserve requirements of a simple economy with production and financial intermediation subject to costly state verification, and shows that one motivation for the widely observed reduction in the level of mandatory reserves is linked to the process of financial markets development.     

金融功能、金融发展与中国金融体制改革

金融功能是金融与经济关系的实质、核心与基础。金融功能性资源比其他层次的金融资源更难得,从而更稀缺。金融功能层次的复杂化与提升,功能层次与种类的扩展与强化过程即是金融功能的演进,金融功能的演进即是金融发展。在此基础上以金融发展的金融功能观视角来进行中国金融发展状况的功能判断,提出中国金融体制改革的若干思考。     

Two to tangle: Financial development, political instability and economic growth in Argentina

This paper studies the impact of financial liberalization on economic growth. It contributes to this literature by using an innovative econometric methodology and a unique data set of historical series. It presents power ARCH estimates for Argentina for the period from 1896 to 2000. The main results show that the long-run effect of financial liberalization on economic growth is positive while the short-run effect is negative, albeit substantially smaller. Interestingly, we find that financial development affects growth only directly, that is, not through growth volatility.     

Financial development,government ownership of banks and firm innovation

Using a newly-available World Bank survey of over 28,000 firms from 46 countries, we examine how financial development affects firm innovation around the world. We find that while stock market development significantly enhances firm innovation, banking sector development has mixed effects. We show that the latter result can be explained by different levels of government ownership of banks. Specifically, in countries with lower government ownership of banks, banking sector development significantly enhances firm innovation; while in countries with higher government ownership of banks, banking sector development has no significant or sometimes even significantly negative effects on firm innovation. Such negative effects are significantly stronger for smaller firms. The results are robust to various controls such as firms’ human capital and ownership structure, to estimations using instrumental variable techniques and alternative measures of firm innovation.     

Financial development,corporate governance and cost of equity capital

Existing research suggests that external governance is more relevant than internal governance in affecting a firm’s value. We contribute to the literature by explicitly examining the interactive role played by country-level financial development and legal institutions in influencing the impact of firm-level governance on the cost of equity capital. Using a comprehensive sample of 7380 firm years drawn from 22 developed countries, we show that firm-level corporate governance attributes affect the cost of equity capital primarily in the Common Law countries with high levels of financial development. Our study is the first to highlight the complementary effects of legal origin, financial development and firm-level governance attributes in influencing the cost of equity capital.