Working Paper
Market- vs. bank-based financial systems: do investor rights really matter?
Ergungor, O. Emre (2002)
Why are common-law countries market-dominated and civil-law countries bank-dominated when either financial structure can promote economic growth? This paper provides an explanation tied to legal traditions. Civil-law courts have been less effective in resolving conflicts than common-law courts because civil-law judges traditionally refrain from interpreting the codes and creating new rules. Banks can induce borrowers to honor their obligations by threatening to withhold services that only banks can provide.
Working Papers (Old Series) , Paper 0101R