Deposit Insurance and External Finance / Stephen G. Cecchetti, Stefan Krause.

Format:

Book

Author/Creator:

Cecchetti, Stephen G.

Contributor:

National Bureau of Economic Research.

Krause, Stefan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10908.

NBER working paper series no. w10908

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

Countries around the world differ substantially in the relative importance of their banks and capital markets in providing investment financing. This paper examines one potential explanation for the cross-country differences in the importance of banks and capital market financing of investment. It is our contention that much of the variation across countries in the depth and breadth of capital markets can be explained by a combination of the existence of deposit insurance and the extent to which a country's banking system is state owned. We provide both an equilibrium model predicting and empirical evidence showing that countries with explicit deposit insurance and a high degree of state-owned bank assets have smaller equity markets, a lower number of publicly traded firms and a smaller amount of bank credit to the private sector. Finally, our results suggest that the effects of deposit guarantees are more important than the origins of national legal systems.

Notes:

Print version record

November 2004.