Cole, Rebel and Moshirian, Fari and Wu, Qionbing (2007): Bank stock returns and economic growth. Published in: Journal of Banking and Finance , Vol. 6, No. 32 (June 2008): pp. 995-1007.
This is the latest version of this item.
Download (162kB) | Preview
Previous research has established (i) that a country’s financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets, we find a positive and significant relationship between bank stock returns and future GDP growth that is independent of the previously documented relationship between market index returns and economic growth. We also find that much of the informational content of bank stock returns is captured by country-specific and institutional characteristics, such as bank-accounting-disclosure standards, banking crises, enforcement of insider trading law and government ownership of banks.
|Item Type:||MPRA Paper|
|Original Title:||Bank stock returns and economic growth|
|Keywords:||Banks; Economic Growth; Emerging Markets; Financial Development|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth
|Depositing User:||Prof. Rebel Cole|
|Date Deposited:||01. Mar 2011 20:12|
|Last Modified:||18. Feb 2013 10:09|
Ahn, S., Schmidt, P., 1995. Efficient estimation of models for dynamic panel data. Journal of Econometrics 68, 5–28.
Arellano, M., Bond, S.R., 1991. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, 277–297.
Arellano, M., Bover, O., 1995. Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68, 29–51.
Barth, J.R., Caprio, G., Levine, R., 2001. The Regulation and Supervision of Banks around the World, A New Database. World Bank.
Barth, J.R., Caprio, G., Levine, R., 2004. Bank regulation and supervision: What works best? Journal of Financial Intermediation 13 (2), 205–248.
Beck, T., Levine, R., 2002. Industry growth and capital allocation: Does having a market- or bank-based system matter? Journal of Financial Economics 64, 147–180.
Beck, T., Levine, R., Loayza, N., 2000. Finance and the sources of growth. Journal of Financial Economics 58, 261–300.
Bekaert, G., Harvey, C.R., Lundblad, C., 2005. Does financial liberalization spur growth? Journal of Financial Economics 77, 3–55.
Bharath, S., Dahiya, S., Saunders, S., Srinivasan, S., 2007. So what do I get? The bank’s view of lending relationships. Journal of Financial Economics 85, 368–419.
Bhattacharya, U., Daouk, H., 2002. The world price of insider trading. Journal of Finance 57, 75–108.
Billet, M.T., Flannery, M.J., Garfinkel, J.A., 1995. The effect of lender identity on a borrowing firm’s equity return. The Journal of Finance 50, 699–718.
Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87, 115–143.
Blundell, R., Bond, S., Windmeijer, F., 2000. Estimation in dynamic panel data models: Improving on the performance of the standard GMM estimator. Advances in Econometrics 15, 53–91.
Boyd, J., Smith, B., 1998. The evolution of debt and equity markets in economic development. Economic Theory 12, 519–560.
Bruner, R., Simms, J., 1987. The international debt crisis and bank security returns in 1982. Journal of Money, Credit and Banking 19 (1), 46–55.
Caprio, G., Klingebiel, D., 2003, Episodes of Systemic and Borderline Financial Crises. World Bank Research Dataset.
Carlin, W., Mayer, C., 2003. Finance, investment and growth. Journal of Financial Economics 69, 191–226.
Cetorelli, N., Gambera, M., 2001. Banking market structure, financial dependence and growth: International evidence from industry data. Journal of Finance 56, 617–648.
Cole, R., Moshirian, F., Wu, Q., 2007. Bank Stock Returns and Economic Growth. SSRN Working Paper Series. <http://ssrn.com/abstract=1001155>.
Cornell, B., Shapiro, A., 1986. The reaction of bank stock prices to the international debt crisis. Journal of Banking & Finance 10 (1), 55–73.
Demirguc-Kunt, A., Maksimovic, V., 1998. Law, finance, and firm growth. Journal of Finance 53, 2107–2137.
Dincs, I.S., 2005. Politician and banks: Political influences on governmentowned banks in emerging markets. Journal of Financial Economics 77, 453–479.
Doornik, J.A., Arellano, M., Bond, S., 2002. Panel Data Estimation using DPD for OX. Manuscript, Oxford University.
Fama, E.F., 1981. Stock returns, real activity, inflation, and money. American Economic Review 71, 545–565.
Fama, E.F., 1990. Stock returns, expected returns, and real activity. The Journal of Finance 45, 1089–1108.
Fishe, R.P.H., Robe, M.A., 2004. The impact of illegal insider trading in dealer and specialist markets: Evidence from a natural experiment. Journal of Financial Economics 71, 461–488.
Hoggarth, G., Reis, R., Saporta, V., 2002. Costs of banking system instability: Some empirical evidence. Journal of Banking and Finance 26, 825–855.
James, C., 1987. Some evidence on the uniqueness of bank loans: A comparison of bank borrowing, private placements, and public debt offerings. Journal of Financial Economics 19, 217–235.
King, R.G., Levine, R., 1993. Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108, 717–738.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A., 2002. Government ownership of banks. Journal of Finance 57, 265–301.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A., Vishny, R.W., 1998. Law and finance. Journal of Political Economy 106, 1131–1155.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A., Vishny, R.W., 2000. Investor protection and corporate government. Journal of Financial Economics 58, 3–29.
Levine, R., 2005. Finance and growth: Theory and evidence. In: Aghion, Philippe, Durlauf, Steven (Eds.), Handbook of Economic Growth. North-Holland, Amsterdam, pp. 865–934.
Loayza, N., Ranciere, R., 2001. Financial Development, Financial Fragility, and Growth. World Bank Mimeo.
Lummer, S., McConnell, J., 1989. Further evidence on the bank lending process and the market response to bank loan agreements. Journal of Financial Economics 25, 99–122.
Nickell, S., 1981. Biases in dynamic models with fixed effects. Econometrica 49, 1417–1426.
Rajan, R.G., 1992. Insiders and outsiders: The choice between informed and arm’s length debt. The Journal of Finance 47, 1367–1400.
Rajan, R.G., Zingales, L., 1998. Financial dependence and growth. American Economic Review 88, 559–586.
Ranciere, R., Tornell, A., Westermann, F., 2003. Crises and Growth: A Re-evaluation. National Bureau of Economic Research, Working Paper 10073.
Sapienza, P., 2004. The effect of government ownership on bank lending. Journal of Financial Economics 72, 357–384.
Schwert, W., 1990. Stock returns and real activity: A century of evidence. The Journal of Finance 45, 1237–1257.
Slovin, M.B., Sushka, M.E., Hudson, C.D., 1993. The value of bank durability: Borrowers as bank stakesholders. The Journal of Finance 48, 247–266.
Smith, B.D., 2001. Banks, short-term debt and financial crises: Theory, policy implications, and applications, A comment. Carnegie-Rochester Conference Series on Public Policy 54, 73–83.
Available Versions of this Item
Bank stock returns and economic growth. (deposited 05. Sep 2007)
- Bank stock returns and economic growth. (deposited 01. Mar 2011 20:12) [Currently Displayed]