Markets and Institutions in Financial Intermediation: National Characteristics as Determinants

Journal of Banking & Finance, Vol. 33, No. 10, pp. 1770-1780

30 Pages Posted: 11 Sep 2009

See all articles by Raj Aggarwal

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland; Kent State University; Kent State University Foundation

John W. Goodell

University of Akron - Department of Finance, College of Business Administration

Date Written: December 30, 2008

Abstract

Given the importance of financial intermediation and the rise of globalization, there is little prior research on how national preferences for financial intermediation (markets versus institutions) are determined by cultural, legal, and other national characteristics. Using panel analysis for data on a recent eight-year period for thirty countries, this paper documents that national preferences for market financing increase with political stability, societal openness, economic inequality, and equity market concentration, and decreases with regulatory quality and ambiguity aversion. We confirm with robustness tests that our result for regulatory quality is independent of differences in national wealth and that our result for political stability is independent of both wealth and political legitimacy. These results should be of much interest to managers, scholars, regulators, and policy makers.

Keywords: financial institutions, banks, financial markets, universal banks, comparative financial systems, legal traditions, uncertainty avoidance, trust, property rights

JEL Classification: G10, G20, N20, O16

Suggested Citation

Aggarwal, Raj and Goodell, John W., Markets and Institutions in Financial Intermediation: National Characteristics as Determinants (December 30, 2008). Journal of Banking & Finance, Vol. 33, No. 10, pp. 1770-1780, Available at SSRN: https://ssrn.com/abstract=1471518

Raj Aggarwal (Contact Author)

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Kent State University ( email )

College of Business Administration
Kent, OH 44242-0001
United States

Kent State University Foundation ( email )

Akron, OH 44325-4803
United States

John W. Goodell

University of Akron - Department of Finance, College of Business Administration ( email )

259 S. Broadway
Akron, OH 44325
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
159
Abstract Views
1,717
rank
225,704
PlumX Metrics