Funding growth in bank-based and market-based financial systems: evidence from firm-level data

By Asli Demirgüç-Kunt, Vojislav Maksimovic. 2002

644 citations recorded by the source corpus.

The authors investigate whether firms' access to external financing, to fund growth differs between market-based, and bank-based financial systems. Using firm-level data for forty countries, they compute the proportion of firms in each country that relies on external finance, and examine how that proportion differs across financial systems. They find that the development of a country's legal system predicts access to external finance, and that stock markets, and the banking system have different effects on access to external markets. The development of securities markets is related more to the availability of long-term financing, whereas the development of the banking sector is related more to the availability of short-term financing. They find no evidence, however, that firms' access to external financing is predicted by an index of the development of stock markets, relative to the development of the banking system.

Subfields: Accounting, Finance, Information Systems

View Paper: https://www.semanticscholar.org/paper/18710d49588a35d2dde1d54ced05540fe5c76a3c

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Citations in the corpus

Sovereign Credit Ratings, Capital Flows and Financial Sector Development in Emerging Markets (2006, background): “There exists a well-established literature assessing financial development, the bank or market orientation of financial systems and particularly their promotion of economic development and growth at the aggregate, industry and firm level (see inter alia Greenwood and Jovanovic (1990), King and Levin”
Accounting Quality and Firm-Level Capital Investment (2006, background): “[1997], Demirguc-Kunt and Maksimovic [1998]), we focus on firm-level capital investment decisions.”
Understanding Banking Sector Globalization (2009, background): “However, other work finds no evidence that country differences in economic growth can be explained by distinguishing countries by type of financial structure, that is, bank-based vs. market-based structures (Demirguç-Kunt and Maksimovic, 2002).”
The Impact of Corporate Governance on Investment Returns in Developed and Developing Countries (2003, methodology): “7 Recent studies which also employ the LLSV classification include Himmelberg et al. (2000) and Demirgüc-Kunt and Maksimovic (2000).”
Financial development and innovation: Cross-country evidence (2014, background): “(2) stock market turnover (Demirguc-Kunt and Maksimovic, 2002), Turnoveri,t, that is the natural logarithmic ratio of country i’s stock market traded value over its stock market capitalization in year t; (3) GDP growth, ∆GDPi,t, that is defined as country i’s natural logarithmic GDP in year t minus ”
Law and Firms' Access to Finance (2004, neutral): “Demirgüç-Kunt and Maksimovic (1998, 2002) show that firms in countries with more efficient legal systems grow faster than predicted by a textbook financial planning model.”
The Econometrics of Finance and Growth (2008, methodology): “35 Subsequently, this technique has been applied by Demirguc-Kunt and Maksimovic (2002) and Guiso, Sapienza and Zingales (2004), among others.”
Monetary Policy Through Production Networks: Evidence from the Stock Market (2017, neutral): “However, recent work by Gabaix (2011) and Acemoglu et al.”