State-controlled listed firms in China receive preferential treatment when borrowing from commercial banks; in contrast, private controlled firms rely on informal finance and on trade credit. We argue for and find evidence that private firms located in higher social trust regions use more trade...

This essay reflects upon the relationship between the current theory of financial intermediation and real-world practice. Our critical analysis of this theory leads to several building blocks of a new theory of financial intermediation. Current financial intermediation theory builds on the...

The vast majority of firms in developing economies are micro and small enterprises owned by families whose members also provide the labour to the units. Often, they fail to grow in size even with the relaxation of credit constraints. In this paper, we show that frictions in the labour market...

Since the 1990s economists have devoted considerable attention to the study of the relationship between financial markets development and economic growth. In particular, the emergence of stock markets with economic development is an intriguing and interesting aspect of such a relationship, and...

The vast majority of firms in developing economies are micro and small enterprises owned by families whose members also provide the labour to the units. Often, they fail to grow in size even with the relaxation of credit constraints. In this paper, we show that frictions in the labour market...

Understanding the market efficiency of a particular stock market is very important to assist existing and prospective investors to make well informed decisions. In a capital market where few players dominate the market, insider dealings are more likely to take place which has significant impact...

The vast majority of firms in developing economies are micro and small enterprises owned by families whose members also provide the labour to the units. Often, they fail to grow in size even with the relaxation of credit constraints. In this paper, we show that frictions in the labour market...

In the study of economic and financial panel data it is often important to differentiate between time-series and cross-sectional effects. We present two estimation procedures that can do so and illustrate their application by examining international variations in expected equity premia and...

Mehra and Prescott (1985) raised an issue that has still not yet been resolved in a satisfactory manner: the risk premium on US shares is (much) higher than could be explained by the neoclassic financial economics paradigm. Since then, this unresolved problem has become known as the Equity...

It is a widespread view that derivatives played a crucial role during the recent financial and economic crisis. This opinion manifested in headlines such as “Why Derivatives Caused Financial Crisis” and derivatives have been termed “Financial Weapons of Mass Destruction”. However, the...