Financial Markets Reform, Patterns of Corporate Finance, and the Continued Dominance of Large Banks: Israel 1985-95

Posted: 19 Aug 1998

See all articles by Yishay Yafeh

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Oved Yosha

Tel Aviv University - The Eitan Berglas School of Economics (Deceased)

Abstract

We examine the impact of capital markets reform on patterns of corporate finance in Israel, focusing on the role of banks in the Israeli financial system, and in particular on whether their role has changed following a decade of liberalization. Our main finding is that, although external financing through equity issues on stock markets (in Israel and abroad) has increased, the financial system is still bank dominated. Using a simple model, we suggest that continued bank dominance may reflect a deliberate strategy of the (universal) banks to restrict competition in arm's length capital markets by strengthening bank-firm relationships. Similar phenomena may well be expected in other countries.

JEL Classification: E44, G21, G32

Suggested Citation

Yafeh, Yishay and Yosha, Oved, Financial Markets Reform, Patterns of Corporate Finance, and the Continued Dominance of Large Banks: Israel 1985-95. Economic Systems, Vol. 22, No. 2, June 1998. Available at SSRN: https://ssrn.com/abstract=115988

Yishay Yafeh (Contact Author)

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)

HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Oved Yosha

Tel Aviv University - The Eitan Berglas School of Economics (Deceased)

N/A

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