Analysis of a panel data set for 1976-98 shows that on balance stock markets and banks positively influence economic growth; findings that do not result from biases induced by simultaneity, omitted variables, or unobserved country-specific effects

A country's level of financial development and the legal environment in which financial intermediaries and markets operate critically influence economic development. In countries whose financial sectors are more fully developed and whose legal systems protect the rights of outside investors,...

Large and foreign-owned institutions may have difficulty extending relationship loans to informationally opaque small firms. Bank distress does not appear to affect small business lending, although even small firms may react to bank distress by borrowing from multiple banks