Levine, RossBeck, Thorsten2014-08-282014-08-282000-06https://hdl.handle.net/10986/19840The authors find no evidence for the superiority of either market-based or bank-based financial systems for industries dependent on external financing. But they find overwhelming evidence that industries heavily dependent on external finance grow faster in economies with higher levels of financial development, and with better legal protection for outside investors - including strong creditor and shareholder rights and strong contract enforcement mechanisms. Financial development also stimulates the establishment of new firms, which is consistent with the Schumpeterian view of creative destruction. Financial development matters. That the financial system is bank-based on market-based offers little additional information.en-USCC BY 3.0 IGOACCOUNTING STANDARDSANNUAL GROWTHANNUAL GROWTH RATEBANK CREDITBANKING SECTORBANKSBOARDS OF DIRECTORSCAPITAL ACCUMULATIONCAPITAL EXPENDITURESCAPITALIZATIONCASH FLOWSCIVIL LAWCOMMON LAWCOMPARATIVE ADVANTAGECOMPARATIVE ADVANTAGESCONTRACT ENFORCEMENTCORPORATE PROFITSCOUNTRY DATACOUNTRY GROWTH REGRESSIONSCOUNTRY VARIATIONDEBTDEPENDENT VARIABLEDESCRIPTIVE STATISTICSECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC PERFORMANCEEMPIRICAL RESULTSENTREPRENEURSHIPEXTERNAL FINANCEFINANCIAL DEVELOPMENTFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIATIONFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL SECTOR DEVELOPMENTFINANCIAL SERVICESFINANCIAL STRUCTUREFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIAL TRANSACTIONSGDPGROSS DOMESTIC PRODUCTGROWTH RATEGROWTH RATESINCOMEINDEPENDENT VARIABLESINSTITUTIONAL DEVELOPMENTLARGE SHAREHOLDERSLEGAL ORIGINLEGAL SYSTEMSLIQUID MARKETSLIQUIDATIONLIQUIDITYMARKET CAPITALIZATIONNATIONAL OUTPUTNEGATIVE SIGNPOLICY RESEARCHPRIVATE CREDITPRIVATE SECTORREORGANIZATIONRESOURCE ALLOCATIONREVERSE CAUSALITYRULE OF LAWSECTOR ACTIVITYSHAREHOLDERSSIGNIFICANT IMPACTSTOCK MARKETSTOCK MARKETSSTOCK PRICESTAKEOVERTRANSACTION COSTSTRANSACTIONS COSTSVALUE ADDED10.1596/1813-9450-2383