The regulatory and supervisory practices most effective in promoting good performance and stability in the banking sector are those that force accurate information disclosure, empower private sector monitoring of banks, and foster incentives for private agents to exert corporate control

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