Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?

46 Pages Posted: 7 Jun 2002 Last revised: 18 Jul 2022

See all articles by Thorsten Beck

Thorsten Beck

City University London - The Business School; Tilburg University - European Banking Center, CentER

Ross Levine

Stanford University; National Bureau of Economic Research (NBER)

Date Written: June 2002

Abstract

Are market-based or bank-based financial systems better at financing the expansion of industries that depend heavily on external finance, facilitating the formation of new establishments, and improving the efficiency of capital allocation across industries? We find evidence for neither the market-based nor the bank-based hypothesis. While legal system efficiency and overall financial development boost industry growth, new establishment formation, and efficient capital allocation, having a bank-based or market-based system per se does not seem to matter much.

Suggested Citation

Beck, Thorsten and Levine, Ross, Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter? (June 2002). NBER Working Paper No. w8982, Available at SSRN: https://ssrn.com/abstract=315332

Thorsten Beck

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Ross Levine (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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