Legal institutions, democracy and financial sector development

Mihail Miletkov and M. Babajide Wintoki

A chapter in Corporate Governance and Firm Performance, 2009, pp 171-196 from Emerald Group Publishing Limited

Abstract: Conventional wisdom suggests that institutional development is a precursor to financial sector development. Using a panel of 122 countries over the period 1970–2000, we find that while there is a correlation between the quality of legal institutions and financial development, the relationship is not causal. Changes in the quality of legal institutions do not predict changes in the level of financial development. The results suggest that legal institutions and the financial sector develop simultaneously and are jointly determined by unobservable country-specific factors.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-3732(2009)0000013009

DOI: 10.1108/S1569-3732(2009)0000013009

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