Does the Size and Quality of the Government Explain the Size and Efficiency of the Financial Sector?

38 Pages Posted: 17 Aug 2009 Last revised: 2 Nov 2009

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2009

Abstract

This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that while increased quality of the government as measured by governance and legal origin positively influence both financial sector size and efficiency, that the size of the government proxied by government expenditure and government ownership of banks, has a negative effect on financial sector efficiency, however, a positive impact on financial sector size, particularly in the low income economies.

Keywords: financial sector size, financial sector efficiency, government size, government efficiency, governance, legal origin, cross county

JEL Classification: O11, O16, O43, O57

Suggested Citation

Cooray, Arusha V., Does the Size and Quality of the Government Explain the Size and Efficiency of the Financial Sector? (August 14, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1452676 or http://dx.doi.org/10.2139/ssrn.1452676

Arusha V. Cooray (Contact Author)

Embassy of Sri Lanka, Oslo ( email )

Norway

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