Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Law, finance, and growth Questions How to measure country’s financial development? How is it related to legal system? How does it affect industrial growth? What are typical financial systems? How do they differ in vulnerability to crisis? NES FF 2005/06 2 Financial development: stock market Size and liquidity of the domestic market – Market equity cap to GDP – # instruments (actively) traded locally • – – – – Stocks / bonds / derivatives # IPOs Free float Trading volume / turnover rate Transaction costs / bid-ask spread NES FF 2005/06 3 Financial development: stock market (2) Global integration – Share of foreign currency denominated obligations – # IPOs / trading volume abroad – Share of foreign investors in trading volume / ownership – Correlation (degree of co-integration) between Russian and foreign indices NES FF 2005/06 4 Financial development: stock market (3) Returns and risks – Mean return / st.dev. / Sharpe coefficient – Synchronicity of individual stock prices • Fraction of variation explained by market factors – Sensitivity to domestic / global risk factors • Oil price / currency / inflation – Duration / credit rating / YTM of bonds – Default / term spread NES FF 2005/06 5 Financial development: corporate sector Corporate governance – #/share companies with IAS reporting / open ownership structure / high (S&P) rating – Share of the largest owner / state – #/share of the independent directors – #/share transactions with the affiliated parties – Dividend yield / payout ratio – Control premium NES FF 2005/06 6 Financial development: corporate sector (2) Financial policy – – – – Debt ratio (financial leverage) Share of bank credits in debt Share of foreign currency obligations in debt Share of investments financed via external sources of capital – Duration of debt NES FF 2005/06 7 Financial development: banking system Bank credits to GDP # banks / large banks / foreign banks – # new / cancelled licenses Concentration – Share of assets / deposits by top (5) banks Average # branches Average credit / deposit rate / duration Share of credits / deposits in foreign currency NES FF 2005/06 8 Finance vs growth: critique of cross-country studies Endogeneity Cross-correlation – Regional effects Measurement error Multicollinearity NES FF 2005/06 9 Finance vs growth: causality Omitted variables – Culture / propensity to save Anticipation – Financial measures are forward-looking Solutions – Using instruments – From country to industry and firm level NES FF 2005/06 10