Bank-based and market-based financial systems: Time-series evidence

In this paper, we reexamine the relative merits of bank-based and market-based financial systems in promoting long-run economic growth, which has been debated since the 19th century. We find that in the U.S., the U.K., and Japan, the stock market played an important role in financing economic growth, whereas the banking sector played a more important role in Germany, France, and Korea. A more detailed subsample analysis shows that for all countries, the banking sector played an important role in the early years of economic growth. Regarding the causal relation between financial systems and economic growth, except for Korea, all countries show that the financial system leads economic growth. A further analysis shows that the banking sector and the stock market in each country were complementary to each other in each country in the process of economic growth except for the U.S., where the two sectors were mildly substitutable.     

Substitution or complementary effects between banking and stock markets: Evidence from financial openness in Taiwan

This study uses quarterly data from 1973 to 2007 to investigate the influence of financial institutions on economic growth in Taiwan. We find that the breakpoint obtained by Gregory and Hansen (1996) appears in the third quarter of 1982, which coincides with the period of financial openness. In addition, the substitution effect between credit and equity markets is improved following financial openness. The negative impact of volatility on real output before financial openness turned positive after financial openness, suggesting that appropriate volatility enhances Taiwan's economic growth under the circumstance of more matured stock market following financial openness. However, the beneficial influence of liquidity on real output before financial openness turned negative afterward, suggesting openness generated the undesirable side effect of excess liquidity that impeded economic growth. Our long-run results are essentially the same even if we take the role of the private bond market into account.     

The dynamics of economic growth,oil prices,stock market depth,and other macroeconomic variables: Evidence from the G-20 countries

This paper examines the linkages between economic growth, oil prices, depth in the stock market, and three other key macroeconomic indicators: real effective exchange rate, inflation rate, and real rate of interest. We employ a panel vector autoregressive model to test Granger causality for the G-20 countries over the period 1961–2012. A novel approach to this study is that we clearly demarcate the long-run and short-run relations between the economic variables. The results show a robust long-run economic relationship between economic growth, oil prices, stock market depth, real effective exchange rate, inflation rate, and real rate of interest. In the long run, real economic growth is found to respond to any deviation in the long-run equilibrium relationship that is found to exist between the different measures of stock market depth, oil prices, and the other macroeconomic variables. In the short run we find a complex network of causal relationships between the variables. While the empirical evidence of short-run causality is mixed, there is clear evidence that real economic growth responds to various measures of stock market depth, allowing for real oil price movements and changes in the real effective exchange rate, inflation rate, and real rate of interest.     

中国金融业资产的规模与效率

通过在金融资产结构与经济增长模型中引入能够综合反映制度变迁的制度变量,证明国家制度变迁对一国金融资产结构与经济增长会起到促进或制约的作用.当制度供给与金融资产结构和经济增长对制度的需求达到均衡时,国家制度安排会优化金融资产结构、促进经济增长,否则便会出现规模与效率的"反比"现象,从而回答了我国金融资产规模与效率之间为什么出现悖论的问题.我国应积极发展非银行金融机构,实现金融体系多元化,对内开放,满足我国经济对多层次、多样化金融的需求,完善金融市场准入制度,优化市场参与主体结构,促进股票市场和银行协调发展.     

中国金融业资产的规模与效率

通过在金融资产结构与经济增长模型中引入能够综合反映制度变迁的制度变量，证明国家制度变迁对一国金融资产结构与经济增长会起到促进或制约的作用。当制度供给与金融资产结构和经济增长对制度的需求达到均衡时，国家制度安排会优化金融资产结构、促进经济增长，否则便会出现规模与效率的“反比”现象，从而回答了我国金融资产规模与效率之间为什么出现悖论的问题。我国应积极发展非银行金融机构，实现金融体系多元化，对内开放，满足我国经济对多层次、多样化金融的需求，完善金融市场准入制度，优化市场参与主体结构，促进股票市场和银行协调发展。     

Do corporations learn from mispricing? Evidence from takeovers and corporate performance

In this article we form the simple prediction that mispricing encourages traders to collect costly information that guides managerial decisions at corporate level. Our findings support this prediction based on evidence derived from both the US market for corporate control and the overall variation in aggregate corporate profits. The trading activity in response to the temporary mispricing of the merging companies provides useful information that leads to the design of high-synergy deals. Such synergies are reflected in an increase in the announcement period acquirer abnormal returns and are not reversed in the long-run. At the market-wide level, our results suggest that the growth in the overall stock trading volume in response to market mispricing is associated with high future corporate profit growth. Overall, after controlling for several economic and financial conditions, the temporary mispricing in a developed and generally efficient stock market stimulates informative trading, ultimately leading to value- and performance-enhancing corporate decisions.     

On the asymmetric relationship between stock market development,energy efficiency and environmental quality: A nonlinear analysis

It has been widely documented in the literature that financial development drives up the impact of CO₂ emissions through increases in real economic activities and the consumption of polluting fossil fuel energy. However, when dealing with stock market development, such upward effects on economic growth, energy efficiency, and carbon emissions seems to give away to a positive impact especially in emerging markets. This paper contributes to this debate by exploring both the symmetric and asymmetric responses of CO₂ emission to changes in stock market development indicators. Using both the panel linear and nonlinear ARDL, our results demonstrate the asymmetric effects of stock market development indicator son carbon emissions in the context of emerging markets. In particular, the long-run elasticities results suggest that positive and negative shocks on stock market indicator decreases environmental quality by increasing carbon emissions. Based on these empirical findings, this study offers some crucial policy implications. Especially, policy makers should implement strong environmental policies in emerging markets economies to reduce carbon emissions of industrial companies without significantly affecting the development of financial markets.     

东亚国家金融结构与经济增长的实证研究

文章首先通过构造衡量金融结构的不同指标,运用金融结构与经济增长的动态面板数据模型,并用广义矩估计法进行估计,得出了在人均GDP高的国家,股票市场比重也高的结论;为验证其显著性,文章把东亚国家分成银行主导型和市场主导型两组分别回归,结论是股票市场比重的提高与人均GDP有显著的关系, 因此, 东亚国家应积极发展股票市场,提高银行体系和股票市场的效率。     

股市波动影响下我国金融发展与经济增长的实证研究

摘要：金融发展理论表明,金融发展能促进资本形成,进而推动经济增长。在我国股市波动的作用影响下．我国金融发展其促进资本形成的功能是否会发生变化？会发生哪些变化？本文利用标准实证增长模型．对我国金融发展和经济增长的关系进行了基于股市波动条件下的实证分析。文章发现：正常的股市波动更有利-y-~．融发展,促进投资,推动经济增长;而受到金融危机冲击下的股市波动则往往会显著的限制金融发展的资本形成。使经济发展遭受损失。     

Linkages between the ADR market and home country macroeconomic fundamentals: Evidence in the context of the BRICs

This study investigates the long-run and short-run lead–lag linkages between American Depositary Receipt (ADR) prices and home country economic fundamentals in the context of the BRICs (Brazil, Russia, India and China). In order to obtain an indication of the segmentation or integration between the ADR market and its underlying stock market, the same investigation is also undertaken in relation to the latter. We find that in the long run, economic growth positively drives ADR returns in the cases of Brazil and China but negatively in the cases of Russia and India. In the short-run, economic growth and money supply lead ADR prices but ADR prices predict inflation and oil prices with regard to Brazil while in Russia, oil prices predict ADR returns but the ADR market leads monetary policies and real economic activity. As regards India, in the short run, oil prices and economic growth lead ADR prices but ADR prices predict money supply changes. Finally, with respect to China, the ADR index lead economic growth and inflation but economic variables do not predict ADR prices in the short-run. In the long run, with the exception of China, we find the same kind of linkages between these economic fundamentals and the underlying stock market although the linkages are somewhat stronger. The short run dynamics for ADRs with respect to economic fundamentals are, however, different for that of the respective home country stock market. This would imply that the ADR market and its underlying stock market, as far as the BRICs are concerned, are integrated in the long-run but not in the short-run.     

Stock markets, banks, and economic growth: Empirical evidence from the MENA region

Over the last four decades, a wide theoretical debate is concerned with the fundamental relationship between financial development and economic growth. Recent studies shed some light on the simultaneous effect of banks and financial system development on growth rather than a separate impact. The empirical study is conducted using an unbalanced panel data from 11 MENA region countries. Econometric issues will be based on estimation of a dynamic panel model with GMM estimators. Thus, peculiarities of MENA region countries will be detected. The empirical results reinforce the idea of no significant relationship between banking and stock market development, and growth. The association between bank development and economic growth is even negative after controlling for stock market development. This lack of relationship must be linked to underdeveloped financial systems in the MENA region that hamper economic growth. Then, more needs to be done to reinforce the institutional environment and improve the functioning of the banking sector in the MENA region. Based on these results, other regions at the same stage of financial development such as Africa, Eastern Europe or Latin America should improve the functioning of their financial system in order to prevent their economies from the negative impact of a shaky financial market.     

The Finance-growth Relationship and the Level of Country Development

We examine whether dynamic impacts of banks and stock markets on economic growth are related to the level of country development. Using annual data from 15 industrial and 15 emerging countries over the period from 1976 to 2005, we find that banking development and stock market development may have distinct short-and long-run impacts on economic growth at various stages of country development. Financial development is not always a panacea for economic growth. Most importantly, our findings suggest that the fully functional tools to render stable growth for a country may depend on the level of the country’s development.     

金融中介发展与经济增长研究述评

根据熊彼特的经济发展理论,金融中介发展通过发现并支持企业家的创新而有利于长期经济增长.理论研究方面,已有文献主要从金融市场信息甄别成本降低、缓解消费信贷约束、分散创新风险等方面对金融发展促进经济增长的渠道展开论证.实证研究方面,这个领域早期的经验研究大多基于发达国家的截面数据,一般发现金融中介发展与经济增长正相关;上世纪90年代以来的研究则开始注重利用面板数据技术,控制估计方程中不可观测的异质性、度量误差、共时联立等内生性问题,已经发现一些支持金融中介发展有利于经济增长的经验证据,但在有关具体传导机制的识别上存在分歧.     

Finance and growth: Time series evidence on causality

This paper re-examines the empirical relationship between financial and economic development while (i) taking into account their dynamics and (ii) differentiating between stock market and banking sector development. We study the cointegration and causality between finance and growth for 22 advanced economies. Our time series analysis suggests that causality patterns depend on whether countries’ financial development stems from the stock market or the banking sector. We show that stock market development tends to cause economic development, while a reverse causality is mostly present between banking sector development and output growth. These findings indicate that the direction of causality between finance and growth is likely to be different at high levels of development.     

Financial intermediation and economic growth: the post-liberalization Indian experience

The paper is concerned with the relationship between economic growth and financial intermediation, in particular stock market development, in post-liberalization India. It identifies three possible relationships: (a) the relationship between growth of manufacturing and growth of the stock market; (b) the relationship between growth of the stock market and growth of traditional financial intermediaries like banks; (c) the relationship between the growth of the primary stock market and that of the secondary stock market. These three relationships are empirically tested using Indian data. While the growth of turnover in the stock market is found to be positively correlated with the change in the growth of manufacturing and the growth of sales of new shares is found to positively affect the secondary market, evidence on the relationship between sales of new shares and traditional banking activities is mixed. The primary stock market is found to crowd out bank deposits, but crowd in bank credit.     

Enter the dragon: Interactions between Chinese,US and Asia-Pacific equity markets, 1995–2010

This paper applies a variety of short-run and long-run time series techniques to data on a broad group of Asia-Pacific stock markets and the United States extending to 2010. Our empirical work confirms the importance of crises in affecting the persistence of equity returns in the Asia-Pacific region and offers some support for contagion effects. Post-Asian financial crisis quantile regressions yield substantial evidence of long-run linkages between the Shanghai market, the US market and many regional exchanges. Cointegration is particularly prevalent at the higher end of the distribution. Our results suggest that the enormous growth of the Shanghai market in the new millennium has been accompanied by a meaningful level of integration with other regional and world markets in spite of ongoing capital controls.     

Macroeconomic determinants of stock market capitalization in an emerging market: fresh evidence from cointegration with unknown structural breaks

This article explores the macroeconomic determinants of stock market development in an emerging market (Pakistan) over the period of 1974–2010. We have applied Zivot–Andrews unit root test for integrating properties of the variables and the autoregressive distributed lag bounds testing for cointegration. The direction of causality between the variables is investigated by applying the vector error-correction model Granger causality approach. Our results revealed that variables are cointegrated for long run relationship. Economic growth, inflation, financial development and investment increase stock market development, but trade openness decreases it. The causality analysis confirms that stock market development is a Granger cause of economic growth, inflation, financial development, investment and trade openness. This article indicates the importance of trade openness while formulating a comprehensive financial policy.     

Dividend sensitivity to economic factors,stock valuation,and long-run risk

In this paper, we develop a theoretical stock valuation model that takes into account the long-run sensitivity of dividends to various economic factors. Our valuation process integrates the multidimensionality of uncertainty, as well as the long-run concept of risk (recently proposed in the literature). More precisely, we demonstrate that a stock’s long-run dividend growth is negatively related to its current dividend–price ratio and linearly related to N sensitivity coefficients, given by the long-run sensitivity between dividends and economic factors. Then, we show that the equilibrium price of a stock is a function of its current dividend, long-run dividend growth, and N risk parameters.     

ON THE DYNAMIC RELATION BETWEEN STOCK PRICES AND EXCHANGE RATES

Abstract In this study we apply recent advances in time-series analysis to examine the intertemporal relation between stock indices and exchange rates for a sample of eight advanced economies. An error correction model (ECM) of the two variables is employed to simultaneously estimate the short-run and long-run dynamics of the variables. The ECM results reveal significant short-run and long-run feedback relations between the two financial markets. Specifically, the results show that an increase in aggregate domestic stock price has a negative short-run effect on domestic currency value. In the long run, however, increases in stock prices have a positive effect on domestic currency value. On the other hand, currency depreciation has a negative short-run and long-run effect on the stock market.     

Conflicts of Interest and Research Quality of Affiliated Analysts in the German Universal Banking System: Evidence from IPO Underwriting

The quality of equity research by financial analysts is a prerequisite for an efficient capital market. This study investigates the quality of earnings forecasts and stock recommendations for initial public offerings (IPOs) in Germany. The empirical study includes 12,605 earnings forecasts and 6,209 stock recommendations of individual analysts for the time period from 1997 to 2004. The focus of this study is on analysing the potential conflicts of interest that arise when the analyst is affiliated with the underwriter of an IPO. In a universal banking system these conflicts of interest are usually more pronounced and therefore interesting to investigate. The empirical findings for the German financial market suggest that earnings forecasts and stock recommendations of the analysts belonging to the lead-underwriter are on average inaccurate and biased, indicating some conflicts of interest. Moreover, the stock recommendations of the analysts that are affiliated with the lead-underwriter are often too optimistic resulting in a significant long-run underperformance for the investor. In contrast, unaffiliated analysts provide better earnings forecasts and stock recommendations that result in a superior performance for the investor.