TY  - JOUR
AU  - Cecchetti,Stephen G.
AU  - Krause,Stefan
TI  - Deposit Insurance and External Finance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10908
PY  - 2004
Y2  - November 2004
UR  - http://www.nber.org/papers/w10908
L1  - http://www.nber.org/papers/w10908.pdf
N1  - Author contact info:
Stephen G. Cecchetti
Monetary and Economic Department
Bank for International Settlements
Centralbahnplatz 2
4002 Basel
SWITZERLAND
Tel: +41 61 280 8350
Fax: +41 61 280 9113
E-Mail: stephen.cecchetti@bis.org

Stefan Krause
E-Mail: krauses@nber.org
AB  - Countries around the world differ substantially in the relative importance of their banks and capital markets in providing investment financing. This paper examines one potential explanation for the cross-country differences in the importance of banks and capital market financing of investment. It is our contention that much of the variation across countries in the depth and breadth of capital markets can be explained by a combination of the existence of deposit insurance and the extent to which a country's banking system is state owned. We provide both an equilibrium model predicting and empirical evidence showing that countries with explicit deposit insurance and a high degree of state-owned bank assets have smaller equity markets, a lower number of publicly traded firms and a smaller amount of bank credit to the private sector. Finally, our results suggest that the effects of deposit guarantees are more important than the origins of national legal systems.
ER  -