Critically examine whether legal institutions matter for financial Essay

Critically examine whether legal institutions matter for financial victimisation with further implications for economic growth - Essay ExampleThe greater the levels of financial development in the country, the wider ar the provisions of financial services that allow risk diversifications, and this in turn boosts the economic growth frizzle of a nation. Joseph Schumpeter first proposed the link amid economic growth and financial development in the proterozoic 20th century, where he claimed that the financial intermediaries advocated technological modifications by providing economic resources for the invention of new products (Schumpeter, 1912). Levine and Zervos (1998) in their written document show that development within the stock market and banking sectors of a nation are reasonably received indicators of the economic growth. For industrial expansions at the microeconomic level, Rajan and Zingales (1998) and Demirguc-Kunt and Maksimovic (1998) feel that financial institutions are an essential compvirtuosont. Despite contentions, a majority of the research papers suggest that there is indeed a potent connection between the financial development and economic growth. ... al intermediation and markets, as well as deep and loose access to capital and financial services (The Financial Development Report 2010, 2010, 4). Here institutions chiefly doctor to laws that control and monitor the financial sector, contractual enforcement and the quality of corporate governance. The word institution as specify by Douglas North (1991) states that these are man-devised constraints that shape a nations socio-economic and political interaction. These constraints maybe internal like social taboos, sanctions, trust, social traditions and customs, social capital, and social codes of conduct or they may also be formal like legal system, constitutions, property rights, etc. Institutions have been devised in to create an order in the society, and decrease the chances of unc ertainty in various transactions and exchanges. As per economic theories, a strong and lasting institutional environment is essential for decreasing the transaction and information charges (Levine, 2004).There are also a monumental number of research papers that establish the close relation between financial development and a countrys institutional characteristics, especially its legal framework (Arestis, Demetriades, and Luintel, 2001). Thus, from a study of papers one can conclude that legal institutions from an essential part of the financial development of a nation, since it works towards defend the investor interests (Barth, J., Caprio, G., and Levine, R., 1999). The law and finance theory centres on the part played by the legal institutions in analysing globular differences perceived in financial development (La Porta, Lopez-de-Silanes, Shleifer, and Vishny, 2000). The law and finance theory suggests that in countries that have strong legal institutions and effective