Abstract
Using a large panel data set covering 160 countries over the period 1990 to 2010, this article aims to address the question of how financial structure (bank-based versus market-based system) changes when economies are liberalized and opened to international capital markets. Specifically, in this study, globalization is characterized not only by trade and financial integration but also by other important aspects, such as social globalization, political globalization and cultural globalization. The empirical results support the impacts of globalization on financial structure, which are, however, diverse and strongly depend on the way to measure globalization and financial structure. Our finding also reveals a significant change in financial structure after the globalization process, except the case of low-income countries, in which financial structure seems to be not correlated with either globalization process or other macroeconomic variables.
Funding
The author gratefully acknowledges financial support from the Chair Finance of the University of Nantes Research Foundation.
Notes
1 The SW index, which is constructed by Sachs et al. (Citation1995), is a dummy variable for openness based on five individual dummies for specific trade-related policies. Relying on this index, a country is classified as closed if it displays at least one of the following characteristics: average tariff rates of 40% or more; nontariff barriers covering 40% or more of trade; a black market exchange rate that is depreciated by 20% or more relative to the official exchange rate, on average, during the 1970s or 1980s; a state monopoly on major exports; a socialist economic system.
2 Including Bangladesh, Kenya, Malawi, Nepal, Tanzania, Uganda and Zimbabwe
3 We only report the results of IV estimator for the full data sample to save space. Other results are available if required.