Does the Political Institution Matter for Financial Development?

Abstract

The study examines the effect of economic institutions on financial development, where economic institutions themselves are endogenous and determined by political power. Following the theory of “economic institution” proposed by Acemoglu et al. (2004), two groups of political power (de jure political power or political institution and de facto political power or distribution of resource) are employed in the analysis. By using the panel data of sixty counties during 1980–2006, the empirical results show that political power is a statistically significant determinant of economic institutions and hence affects the development of financial systems. The result demonstrates that de jure political power has great significant effect on financial development than de facto political power.

Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence from Asia

“…In line with this view, the rule of law and the absence of corruption ensure accountability and stability in the financial sector. Substantial property rights and an effective legal system will eventually result in overall economic and financial development (Voghouei et al, 2011). Finally, greater institutional quality within a financial system provides better financial liberalization (Delis, 2012;Gazdar & Cherif, 2015).…”

“…In our study, institutional quality is evaluated to measure banks' risky behavior, while emphasizes institutional quality as an aspect that affects the relationship between competition and bank stability. It is relevant to the suggestions of previous studies that have shown such an essential role for institutional quality (Delis, 2012;Voghouei et al, 2011).…”

“…This measure captures some of the institutional aspects suggested by the prior empirical literature. These aspects, among others, guarantee property rights, an effective legal system, the rule of law, and control of corruption, and can encourage better financial liberalization so that it affects the overall economic and financial development (Chinn & Ito, 2006;Uddin et al, 2020;Voghouei, Azali, & Law, 2011).…”

How Financial Freedom and Integration Change Public Debt Impact on Financial Development in the Asia‐Pacific: A Panel Smooth Transition Regression Approach

“…A large number of studies investigate institutional factors as determinants of financial development (Chinn and Ito ; Law and Habibullah ; Huang ; Voghouei, Azali and Law ; Le, Kim and Lee ). However, this study offers a new perspective on this issue.…”

Family Firms as a Potential Source of Growth for the Warsaw Stock Exchange

“…The importance of political regimes, as well as the economic model of capital market development, have been frequently investigated by researchers [e.g., Keefer 2007;Voghouei, Azali and Law 2011;Francis and Ofori 2015], and it is clear that in the Polish context, these items were crucial. What is more, politics drive regulations, governance standards, market practices, investment climate and the rules for those who run the businesses.…”