Financial regimes, capital structure, and growth

Lutz Arnold () and Uwe Walz ()

No 134, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: We develop a growth model with endogenous technological progress in which the financial sector plays an explicit role. Thereby we discuss the role of different financial regimes in the growth process. We contrast a bank-dominated financial system with a market-dominated system. In the first one a financial intermediary (a bank) is able to solve informational problems, however, at a cost. There is learning by doing in the banking sector. We ask for circumstances under which one of the two regimes emerges. We show that history matters and that the emergence of the low-growth regime is feasible. Furthermore, in a second step we allow for an endogenous capital structure choice of firms and analyze the evolution of the financial system and capital structure over time.

Keywords: Innovation; growth; financial regimes; capital structure (search for similar items in EconPapers)
JEL-codes: G20 O31 O41 (search for similar items in EconPapers)
Date: 1998
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Journal Article: Financial regimes, capital structure, and growth (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:134

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