Topic
Financial sector development
About: Financial sector development is a research topic. Over the lifetime, 1674 publications have been published within this topic receiving 90787 citations.
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TL;DR: In this paper, the authors study the determinants of the growing migration of stock market activity to international financial centers and find that countries with higher income per capita, sounder macroeconomic policies, more efficient legal systems, better shareholder protection and more open financial markets tend to have larger and more liquid stock markets.
Abstract: The authors study the determinants of the growing migration of stock market activity to international financial centers. They use a sample of 77 countries and document that higher economic growth and more macroeconomic stability help stock market development. Countries with higher income per capita, sounder macroeconomic policies, more efficient legal systems, better shareholder protection, and more open financial markets tend to have larger and more liquid stock markets. The authors show that these factors also drive the degree with which capital raising, listing, and trading have been migrating to international financial centers. As fundamentals improve and technology advances, this migration will likely increase and domestic stock market activity may become too little to support local markets. For many emerging economies, the best policy is to establish sound fundamentals but not necessarily the trading, or even listing of securities locally.
109 citations
TL;DR: In this article, the authors investigate the determinants of firm innovation in over 19,000 firms across 47 developing economies and find that more innovative firms are large exporting firms characterized by private ownership, highly educated managers with mid-level managerial experience, and access to external finance.
Abstract: The authors investigate the determinants of firm innovation in over 19,000 firms across 47 developing economies. They define the innovation process broadly, to include not only core innovation such as the introduction of new products and new technologies, but also other types of activities that promote knowledge transfers and adapt production processes. The authors find that more innovative firms are large exporting firms characterized by private ownership, highly educated managers with mid-level managerial experience, and access to external finance. In contrast, firms that do not innovate much are typically state-owned firms without foreign competitors. The identity of the controlling shareholder seems to be particularly important for core innovation, with those private firms whose controlling shareholder is a financial institution being the least innovative. While the use of external finance is associated with greater innovation by all private firms, it does not make state-owned firms more innovative. Financing from foreign banks is associated with higher levels of innovation compared with financing from domestic banks.
108 citations
01 Apr 2014
TL;DR: In this paper, the authors describe the extent to which poor households typically live and work in the informal economy and explore the implications of this for how access and use of financial services can benefit them.
Abstract: This focus note is organized in three sections. The first section describes the extent to which poor households typically live and work in the informal economy and explores the implications of this for how access and use of financial services can benefit them. The second section summarizes recent empirical impact evidence at the microeconomic, local economy, and macroeconomic levels. The third section tees up two areas in which inclusive, low-cost financial systems can generate additional, indirect benefits for other public-sector and private-sector efforts.
108 citations
TL;DR: The authors examined the causal relationship between financial development and economic growth in India for the period 1970-1971 to 1998-1999, using the techniques of unit root and cointegration analysis.
Abstract: This paper examines the causal relationship between financial development and economic growth in India for the period 1970–1971 to 1998–1999, using the techniques of unit root and cointegration analysis. The results show that, for the period under consideration, it is M3, representing financial sector development, which led GDP and not the other way around.
105 citations
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TL;DR: This article examined the causal linkage between foreign direct investment and economic growth in Cote’ d'Ivoire, Gambia, Ghana, Nigeria and Sierra Leone with financial development accounted for over the period 1970-2005 within a trivariate framework which applies Granger causality tests in a VEC setting.
Abstract: The present paper examines the causal linkage between foreign direct investment (FDI) and economic growth - in Cote’ d’Ivoire, Gambia, Ghana, Nigeria and Sierra Leone - with financial development accounted for over the period 1970-2005 within a trivariate framework which applies Granger causality tests in a vector error correction (VEC) setting. Three alternative measures of financial sector development - total liquid liabilities, total banking sector credit and credit to the private sector - were employed to capture different ramifications of financial intermediation. Our results support the view that the extent of financial sophistication matters for the benefits of foreign direct investment to register on economic growth in Ghana, Gambia and Sierra Leone depending on the financial indicator used. Nigeria, on the other hand, displays no evidence of any short- or long-run causal flow from FDI to growth with financial deepening accompanying. In sum, therefore, what should be of utmost urgency is concerted efforts in most of these countries, which have typically been in the throes of economic reforms, to upgrade their financial structure to better position them to reap the desirable growth promoting effects of FDI flows.
103 citations