Bank Based And Market Based Financial Systems

3022 Words Apr 2nd, 2015 13 Pages
This paper evaluates the bank-based and market-based financial systems and develops links to economic growth of countries implementing them. Financial systems promote economic growth but levels to which either system is said to be robust and better has been difficult to tell. Evolution of systems and ownership structures existent in different countries emphasize their adaptation to a given structure. Does investor protection promote economic development based on financial system practised? Arguments as to whether investor protection guidelines can contribute to economic development within either financial system will be discussed.
Financial systems are designed to mobilize and market economic resources, share and manage risks and returns (Goergen M. 2012). In an effort to boost economic growth, they provide information about potential investment, monitor and motivate investments through corporate governance (Pham T. H. H. 2014).They also enable trading, diversification and encourage amalgamation of savings. The ability by financial systems to acquire information and allocate risk y linking platform between structure of financial systems and economic development (Allen F. Gu X. and Kowalewski O. 2012).
According to Lee B. (2012) and Beck T. and Levine R. (2002), economists have tried to derive qualities of the financial systems in an effort to illustrate which of the structures has greater impact to economic growth and performance.
Bank-based systems place…
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