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Finance, Investment and Growth

Wendy Carlin
University College London - Department of Economics; Centre for Economic Policy Research (CEPR)

Colin Mayer
University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

June 25, 2000

Presented at Tuck-JFE Contemporary Corporate Governance Conference

Abstract:
This paper proposes an empirical approach to investigating how the structure of countries' financial and ownership systems and the characteristics of industries relate to industry activity in different countries. Activity is measured in 'abnormal' rather than absolute terms by the growth, fixed investment shares and R&D shares of particular industries in different countries relative to their industry and country averages. Using data on 27 industries in 14 advanced OECD countries from 1970-1995, we regress activity on a set of variables that interact country financial and ownership structures with industry characteristics. We find evidence of a relation and that there are similarities in the combinations of country structure and industry characteristic associated with growth and R&D (but not fixed investment). Consistent with theories of financial development, the relations are sensitive to stages of economic development. For example, the interaction of bank-oriented system with external-finance dependent industries is associated with abnormal growth in low but not high GDP per capita countries.

Keywords: Financial Systems, Ownership, Legal Form, Growth, Investment

JEL Classifications: E2, G3, G4

Working Paper Series

Date posted: July 24, 2000 ; Last revised: September 07, 2000

Suggested Citation

Carlin, Wendy and Mayer, Colin, Finance, Investment and Growth (June 25, 2000). Presented at Tuck-JFE Contemporary Corporate Governance Conference. Available at SSRN: http://ssrn.com/abstract=236104 or doi:10.2139/ssrn.236104

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Contact Information

Colin Mayer (Contact Author) University of Oxford - Said Business School ( email ) Park End Street Oxford OX1 1HP Great Britain +44 1865 288112 (Phone) +44 1865 288805 (Fax)
Centre for Economic Policy Research (CEPR) 90-98 Goswell Road London EC1V 7RR United Kingdom
European Corporate Governance Institute (ECGI) c/o ECARES ULB CP 114 B-1050 Brussels Belgium HOME PAGE: http://www.ecgi.org
Wendy Carlin University College London - Department of Economics ( email ) Gower Street London WC1E 6BT WC1E 6BT United Kingdom +44 20 7679 5858 (Phone) +44 20 7916 2775 (Fax)
Centre for Economic Policy Research (CEPR) 90-98 Goswell Road London EC1V 7RR United Kingdom