Institutional quality, governance, and financial development

Law, Siong Hook; Azman-Saini, W.N.W.

doi:10.1007/s10101-012-0112-z

Cited by 210 publications

(157 citation statements)

References 55 publications

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“…In addition, Levine found that contract enforcement and information disclosure are significant determinants of financial development. Using institutional quality measures from the International Country Risk Guide (ICRG), Law and Azman-Saini (2012) also demonstrated that a high quality institutional and governance environment is important in expanding financial development, specifically in the banking sector. Demetriades and Law (2006) and Law et al (2013) argued that financial development embedded within a sound institutional framework is more potent in delivering long-run economic development.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Globalisation, Institutional Reforms and Financial Development in East Asian Economies

2014

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This study investigates the dynamic effects of globalisation on institutions and financial development in East Asian economies using panel data tests. Our empirical results demonstrate that globalisation has a significant influence on institutional quality, and that institutional reforms in turn facilitate and support financial development, in particular the development of the banking sector in East Asia. Globalisation is also found to have a favourable direct impact on stock market development without passing through an institutional quality channel.

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Section: Review Of Related Literaturementioning

confidence: 99%

Globalisation, Institutional Reforms and Financial Development in East Asian Economies

2014

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“…A number of studies have however shown that the effect of financial development on economic growth is also conditional on many other factors rather than by itself alone. These included the thresholds of other variables such as inflation (Rousseau & Wachtel 2002;Yilmazkuday 2011), government size, trade openness and income per capita (Yilmazkuday 2011), financial sector policies (Abiad & Mody 2005;Ang 2008), legal systems (Porta et al 1997(Porta et al , 1998, government ownership of bank (Andrianova et al 2008;Porta et al 2002), culture (Stulz & Williamson 2003), trade and financial openness (Law 2009;Rajan & Zingales 2003), remittances (Demirguc-Kunt et al 2011), political institutions (Girma & Shortland 2008;Huang et al 2010;Roe & Siegel 2011;), and institutional quality (Law & Azman-Saini 2012;Law, et al 2013;Law, et al 2017). The influence of these mediating variables indicate that the role of financial development is subjected to the prevailing economic condition.…”

Section: Introductionmentioning

confidence: 99%

Nonlinear Relationship between Financial Development and Economic Growth: Evidence from Post Global Financial Crisis Panel Data

Bahri

Nor²,

Sarmidi³

et al. 2018

JEM

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Existing studies find that the nonlinear relationship between financial development and economic growth is inverted U-shaped or there exist Kuznets curve, where financial development harm growth after surpassed the threshold point. The objective of this study is to re-estimate the existing relationship between financial development and economic growth for 65 developing countries for the period post 2007-2008 Global Financial Crisis starts from 2009-2015 using Generalized Method-of-Moment (GMM). Three financial development indicators namely, domestic credit to private sector (DCPS), liquid liabilities (LL) and private credit to deposit money (PCDM) are used in this study. However, our findings are contrary to the previous study. Interestingly, our result shows that the nonlinear relationship between financial development and economic growth is U-shaped for all indicators. In other words, financial development accelerated economic growth after reaching the turning point. The results of U-test of Lind and Mehlum (2010) confirms that the U-shaped relationship exist. It shows that the higher financial development enhance the performance of economic growth. Thus, our results challenge the previous findings and recommend for policy review.

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“…Finally, we select control of corruption, rule of law, regulatory quality, voice and accountability, political stability and government effectiveness from the World Governance Indicators database. We expect that the ratio of bank credit is higher in countries with better quality of institutions (see Huang, 2005;Baltagi et al, 2009;Law and Azman-Saini, 2012;Gazdar and Cherif, 2014). 4 While better information transparency and independence lead to a stronger banking sector, bank development might improve monetary independence and transparency of economic policies.…”

Section: Datamentioning

confidence: 99%

“…Openness of economies to trade and capital flows also leads to a strong financial sector (e.g., Chinn and Ito, 2006;Baltagi et al, 2009). Others support the role of economic institutions in explaining the development of the financial sector with split views of linear and nonlinear effects (see Baltagi et al, 2009;Law and Azman-Saini, 2012).…”

Section: Introductionmentioning

confidence: 99%

Threefold Policies for Bank Development: Do Independence and Transparency Matter?

Trabelsi¹

2018

SSRN Journal

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A well-developed banking sector is crucial to achieve a sustained economic growth. To attain this goal, both central banks and governments have embraced operational and institutional arrangements. In this paper, we offer an empirical lookup on how central bank independence and transparency of macroprudential and fiscal policies are linked to bank development. We also look at the mechanisms (channels) through which the respective effects are transmitted to bank development. Drawing upon a panel dataset of emerging and developing economies over the period 1998-2014, we find that both macroprudential transparency and fiscal transparency are positively related to the share of credit granted by banks to the private sector, implying that more transparent policies enhance bank development. A higher degree of central bank independence, however, does not affect the ratio of bank credit to GDP but its matters for the ratio of liquid assets.

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Institutional quality, governance, and financial development

Cited by 210 publications

References 55 publications

Globalisation, Institutional Reforms and Financial Development in East Asian Economies

Globalisation, Institutional Reforms and Financial Development in East Asian Economies

Nonlinear Relationship between Financial Development and Economic Growth: Evidence from Post Global Financial Crisis Panel Data

Threefold Policies for Bank Development: Do Independence and Transparency Matter?

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