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Financial crisis, structure and reform

Allen, Franklin; Gu, Xian; Kowalewski, Oskar

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Authors

Franklin Allen

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Dr Xian Gu xian.gu@durham.ac.uk
Associate Professor in Finance

Oskar Kowalewski



Abstract

In this study, we examine the relationship between the structure of financial systems and financial crises. Using cross-country data on financial structures and crises, we find that there is a significant short-term reversal in development of the banking sector and the stock market during both bank crises and market crashes, with the corporate bond market moving in the same direction as bank credit. However, the results are significant for countries with market-based financial systems but not for countries with bank-based financial systems. Emerging markets have mainly bank-based financial systems, which may explain why these markets require more time to recover from economic downturns after a financial crisis. Therefore, we argue that governments should emphasize a balanced financial system structure as it helps countries to recover from financial crises more quickly compared with countries that lack such balanced structures.

Citation

Allen, F., Gu, X., & Kowalewski, O. (2012). Financial crisis, structure and reform. Journal of Banking and Finance, 36(11), 2960-2973. https://doi.org/10.1016/j.jbankfin.2012.06.002

Journal Article Type Article
Acceptance Date Jun 5, 2012
Online Publication Date Jun 22, 2012
Publication Date 2012-11
Deposit Date Aug 4, 2020
Publicly Available Date Aug 4, 2020
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 36
Issue 11
Pages 2960-2973
DOI https://doi.org/10.1016/j.jbankfin.2012.06.002
Public URL https://durham-repository.worktribe.com/output/1295219

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