The role of institutional investors in the financial development

Alin Marius Andrieş (), Mihaela Brodocianu and Nicu Sprincean
Additional contact information
Alin Marius Andrieş: Alexandru Ioan Cuza University of Iasi
Mihaela Brodocianu: Alexandru Ioan Cuza University of Iasi
Authors registered in the RePEc Author Service: Alin Marius Andrieș

Economic Change and Restructuring, 2023, vol. 56, issue 1, No 14, 345-378

Abstract: Abstract During last decades, financial assets and trading volumes of institutional investors have increased worldwide at a rapid pace, influencing the structure of financial system, encouraging innovation and efficiency and enlarging economy’s financing possibilities. In this paper, we assess how institutional investors influence financial development using a dataset covering 34 countries members of Organisation for Economic Co-operation and Development (OECD) during 1995–2019 period. Our results suggest that the increased presence of institutional investors, especially investment funds, is beneficial for the financial system as a whole, a finding that is robust across different specifications and estimation techniques, both static and dynamic. We extend our analysis by examining the main components of financial development and document that the effect manifests primary for financial institutions, whereas the influence on financial markets is found to be statistically insignificant. Therefore, institutional investors can improve the access to long-term investments and financial services. Findings bear critical policy implications for policymakers that seek to promote financial development as creating propitious conditions, robust regulatory environment and greater flexibility in investment regulations, especially for pension funds and insurance companies, will contribute to better risk-adjusted returns and thus enhanced development of the financial system.

Keywords: Institutional investors; Financial development; Financial institutions; Financial markets (search for similar items in EconPapers)
JEL-codes: E44 G15 G20 G23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10644-022-09425-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:56:y:2023:i:1:d:10.1007_s10644-022-09425-0

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-022-09425-0

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().