Financial structures, political risk and economic growth

Liu, P., Peng, Y., Shi, Y. and Yang, J. (2022) Financial structures, political risk and economic growth. European Journal of Finance, 28(4-5), pp. 356-376. (doi: 10.1080/1351847X.2021.1879888)

Abstract

Using a panel of 113 countries over the period from 1990 to 2013, this paper provides new empirical evidence to the intensive debate of whether financial structure is relevant for economic growth. Specifically, we evaluate the role of political risk, development stage and their interactions with the structure of the financial system. We find that on average a more market-based financial system is associated with a higher level of economic growth. This impact varies with different levels of political risk and different stages of economic development. Specifically, the comparative development of equity markets compared with banks appear to promote more economic growth in countries with lower political risk and at a better stage of economic development. Moreover, banks are more important to economic growth in over-market-based financial systems, whilst equity markets are more sensitive to economic growth in over-bank-based financial systems. Our paper provides new insights into the real effects of the mixture of banks and markets on the economy.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Shi, Dr Yukun
• Authors: Liu, P., Peng, Y., Shi, Y., and Yang, J.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: European Journal of Finance
• Publisher: Taylor & Francis
• ISSN: 1351-847X
• ISSN (Online): 1466-4364
• Published Online: 08 February 2021
• Copyright Holders: Copyright © 2021 Informa UK Limited, trading as Taylor and Francis Group
• First Published: First published in European Journal of Finance 28(4-5): 356-376
• Publisher Policy: Reproduced in accordance with the publisher copyright policy