Financial crisis, structure and reform

Allen, Franklin; Gu, Xian; Kowalewski, Oskar

Abstract

In this study, we examine the relationship between the structure of financial systems and financial crises. Using cross-country data on financial structures and crises, we find that there is a significant short-term reversal in development of the banking sector and the stock market during both bank crises and market crashes, with the corporate bond market moving in the same direction as bank credit. However, the results are significant for countries with market-based financial systems but not for countries with bank-based financial systems. Emerging markets have mainly bank-based financial systems, which may explain why these markets require more time to recover from economic downturns after a financial crisis. Therefore, we argue that governments should emphasize a balanced financial system structure as it helps countries to recover from financial crises more quickly compared with countries that lack such balanced structures.

Citation

Allen, F., Gu, X., & Kowalewski, O. (2012). Financial crisis, structure and reform. Journal of Banking and Finance, 36(11), 2960-2973. https://doi.org/10.1016/j.jbankfin.2012.06.002

• Journal Article Type: Article
• Acceptance Date: Jun 5, 2012
• Online Publication Date: Jun 22, 2012
• Publication Date: 2012-11
• Deposit Date: Aug 4, 2020
• Publicly Available Date: Aug 4, 2020
• Journal: Journal of Banking and Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 36
• Issue: 11
• Pages: 2960-2973
• DOI: https://doi.org/10.1016/j.jbankfin.2012.06.002
• Public URL: https://durham-repository.worktribe.com/output/1295219