Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Finance, banking system

Institution and Financial Development of Transition Economies

Author ZhangYongHui
Tutor WangHaiTao
School Northeastern University
Course Political Economics
Keywords institution financial development transition economy institution change
CLC F832.1
Type Master's thesis
Year 2011
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Finance is the core of modern economy. Good financial system has a long-term role in promoting economic development, and the development of the financial system determines the speed of long-term economic development of a country. Then, it is the core of long-term growth that how to build a well-functioning financial system to promote a country’s economy. Law and Finance theory explains the different legal origins, decisive impact on the long-term financial development for a country, and explains the law’s role in the mechanism of financial development. Then, some economists extended the perspective to the property rights institution, political institution, cultural tradition and a series of institutional factors with a more comprehensive perspective. This article is along this broad idea that taking the legal institution, political institution, property institution, culture, religion and other institutional factors into the research framework from a broader perspective on the many factors affecting financial development. In this paper, we take the transition China’s data as the research sample, on the hand which is make up for the shortcomings of the previous study focused on mature market economies, on the other hand which is a response for our country’s urgent reality for the financial industry after the2008financial crisis.First, this paper reviews the Institution and Financial theory by divided it into two parts of financial development and economic growth, institutional environment and financial development, detailed the financial mechanism of economic growth and the mechanism of various institutional to financial. Then, we take some conclusions by econometric analysis to the relationship between various institutions and financial development and the test of the hypothesis derived from the economic theory as following, improvement of the efficiency of the judicial system, improvement of property rights institution, development of non-state economy and the development of social capital which have significant positive impact on financial development, economic development and improvement of legislation have no significant impact on financial development, but the political situation improved and reduced bank concentration has a negative impact on financial development. These findings reflect the complex relationship between environmental change and financial development of transition China. We take the institutional paths of China’s financial development by the study of this complex relationship as following, enhance the independence of the judiciary to improve judicial efficiency for strengthen the implementation mechanism, promote the mutual compatibility and effective allocation of formal institution and informal institution and actively promote financial liberalization.

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