Corporate Governance - Bank&market Based Economies

(1) How and what types of circumstances play as a driver behind the thrive of particular types of industries under economy/economies?

(Carlin and Mayer):

• country characteristics:

        - quality of accounting standards;

        - concentration of the banking industry;

        - ownership concentration.

• industry characteristics:

        - dependence of equity finance;

        - dependence of bank finance;

        - dependence of other stakeholders

Industries that are equity-dependent:

• in advanced countries – growth is strong with good accounting standards and dispersed banking;
• in less developed OECD countries – growth is driven by concentrated banking.

Growth of equity-dependent industries in advanced countries is strong with good accounting standards and dispersed banking.

In less developed OECD countries growth is driven by concentrated banking.

Industries that are dependent on external financing and other stakeholders:

• concentrated ownership is a bigger driver for growth than dispersed ownership.

Industries that are dependent on external financing and other stakeholders grow more rapidly in countries with concentrated rather than dispersed ownership.

(Renegotiation theory):

• young and high-tech industries thrive in systems with many small banks;
• mature industries will prosper in systems with a few large banks.

According to The Renegotiation Theory: Young and high-tech industries will thrive in systems with many small banks More mature industries, where innovation is incremental, will prosper in systems with few large banks.