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Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature

"This paper conducts the first empirical assessment of theories concerning relationships among risk taking by banks, their ownership structures, and national bank regulations. We focus on conflicts between bank managers and owners over risk, and show that bank risk taking varies positively with the comparative power of shareholders within the corporate governance structure of each bank. Moreover, we show that the relation between bank risk and capital regulations, deposit insurance policies, and restrictions on bank activities depends critically on each bank's ownership structure, such that the actual sign of the marginal effect of regulation on risk varies with ownership concentration. These findings have important policy implications as they imply that the same regulation will have different effects on bank risk taking depending on the bank's corporate governance structure"--National Bureau of Economic Research web site

Arguing that a relatively high cost of deposit insurance indicates that a bank takes excessive risks, this article estimates the cost of deposit insurance for a large sample of banks in 14 economies to assess the relationship between the risk-taking behavior of banks and their corporate governance structure. The results suggest that banks with concentrated ownership tend to take the greatest risks, and those with dispersed ownership engage in a relatively low level of risk taking. Moreover, as a proxy for bank risk, the cost of deposit insurance has some power in predicting bank distress

Cover -- Contents -- I. Introduction -- II. Definition of a Banking Crisis -- III. Banking Crises Episodes During 1970-2017 -- IV. Crises Sequencing -- V. Policy Response to Banking Crises -- A. Financial Sector Interventions during Crises -- B. Macro Policies -- VI. Crisis Outcomes -- A. Fiscal Costs of Banking Crises -- B. Peak Nonperforming Loans -- C. Systemic Banking Crisis Duration -- D. Output Losses -- VII. Conclusions -- References -- Appendix -- Figures -- 1. Frequency of Systemic Banking Crises Around the World, 1970-2011 -- 2. Systemic Banking Crises Episodes by Income Level 1970-2017 -- 3. Currency and Sovereign Debt Crises Episodes by Income level -- 4. Financial Crises by Type -- 5. Sequencing of Crises -- 6. Containment and Resolution Policies -- 7. Short-term Interest Rates and Fiscal Balances around Banking Crises -- 8. Gross and Net Fiscal Costs of Banking Crises -- 9. Fiscal Costs in Percent of Financial System Assets -- 10. Increases in Public Debt around Banking Crises -- 11. Peak NPLs in Banking Crises Episodes -- 12. Banking Crises Duration -- 13. Output Losses around Banking Crises -- 14. Output and Export Volume Paths around Banking Crises -- Appendix Tables -- 1. Crisis Dates -- 2. Banking Crises Resolution and Outcomes -- 3. Banking Crisis Policy Responses.

We collect new data to assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms in a large cross-section of 50 countries during the recent crisis. We develop an identification strategy that uses the financial crisis as a shock to credit supply and exploits exogenous variation in the degree to which firms depend on external financing for investment needs, and focus on policy interventions aimed at alleviating the bank capital crunch. We find that the growth of firms dependent on external