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Capital Market Regimes and Bank Structure in Europe

Ronald Shrieves (), Drew Dahl and Michael F. Spivey
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Michael F. Spivey: Clemson University

No 200807, Working Papers from Utah State University, Department of Economics and Finance

Abstract: We hypothesize that features of European capital markets used to distinguish market reliance and investor protection have predictably influenced emerging national differences in bank capitalization, growth, and choice of income-producing activities. We characterize countries' capital regimes as more or less "equity-friendly" or "debt-friendly" based upon their reliance on equity and credit markets and the extent to which their legal frameworks protect shareholders and creditors. Using bank-level data from 13 European countries, 1998 to 2004, we find evidence of positive associations between equity-friendly market features and, respectively, bank capitalization, bank asset growth and the relative emphasis on bank lending to its customers. Support is also provided for hypotheses that credit-friendly capital regimes convey advantages reflected in higher rates of growth in assets and greater emphasis on lending to customers. Our results suggests that integration of European banking markets is mitigated by other, relatively static, features of the equity and debt markets on which banks rely.

Keywords: international banking; market integration; shareholder protection (search for similar items in EconPapers)
JEL-codes: F33 F36 G21 G28 G32 G38 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2009-01-14
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eec, nep-fmk, nep-mon and nep-reg
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https://repec.bus.usu.edu/RePEc/uth/wpaper/DEFWP2008-07.pdf (application/pdf)

Related works:
Journal Article: Capital Market Regimes and Bank Structure in Europe (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:uth:wpaper:200807

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