Research On The Relationship Between Financial Structure And Financial Stability

In modern society, it is obvious that financial development contributes great toeconomic growth, so the relationship between the change of financial system and theeconomic development attracts much attention, especially in recent years, the sustainableattention includes the factors of financial stability. Since1970s, financial crises broke outat the frequency of every four years such as the1987Black Monday Stock Market Crash inthe Wall Street, the1994Mexican Financial Crisis, the followed1997Asian FinancialCrisis, the1999Brazilian Economic Crisis, the2001Argentine Debit Crisis, and the recentGlobal Financial Crisis since2008. The spread of economic crises results in great loss inthe economy and the society, both nationally and globally and the financial instabilitycontains great enormously economic costs. If the crisis happens, the suffered state will paygreatly for it; meanwhile, in the globalization or in the open economy, financial instabilityin one state may influence the macro-economy development and financial instability ofother states. Therefore, financial stability is one of the ultimate goals of monetary policiesand an important research subject on financial stability and the related topics.The traditional view is that the financial crisis frequently occurred in bank dominantfinancial system, but not in the financial market dominant financial system, which hadbeen likely proven by the banking crises before1990s. However, the financial crisisappeared in some market dominant states since1990s, particularly the crisis in2008,which showed the unprecedented range and the destructive power, so that the states allover the world began to examine the relationship between financial structures and financialstability. Because of the complexity of the financial system, there exists many foundationswhen classifying the financial structures and at the same time, the financial structureschanges with financial system, so it is effective to classify the financial structures from therelatively stable functions of the financial system-that is most helpful to deeply analyzethe relationship the financial structures and financial stability and provide theory evidenceand practical instruction to the setup of financial reform measures and the optimization ofthe financial structures.The paper, based on the sorting of the financial structures related notions and theliteratures, from the perspective of risk sharing, takes the relationship between the financialstructures and the financial stability as the principal line and tries to further discuss their relationship and inspect the mechanism and path in which the financial structures influencethe financial stability, particularly in the globalization, in which the financial structuresshow the market trends and the melange of the banking and the businesses of financialmarket, in that way, it is of academic significance to discuss the relationship between thefinancial structures and stability by combining the current status and developing trend.Based on the above work, the paper, according to the conclusions relationship betweenfinancial structures and financial stability, put forward some suggestions on the choice andoptimization of our financial structures. The paper, firstly expounds the theoreticalframework of financial structures and financial stability and puts forward the theory of therelationship between financial structures and financial stability in the perspective of risksharing and points out the theory evidence and analytic path. Secondly, the paper, in theperspective of risk sharing, concretely analyzes two types (banking dominant type andmarket dominant type) of relationship between the financial structures and financialstability. In marketing of financial structures, the mechanism of risk sharing has beenlashing, which has an effect on financial stability. Thirdly, the paper, aimed at the changeof financial structures, elaborates the relationship between financial structures andfinancial stability. In this part, the paper, using the multinational data, empirically tests theconclusion that the financial crises more easily break out in the market dominant states.Finally, aimed at the current status of China and in the perspective of risk sharing, thepaper puts forwards countermeasures about adjusting and optimizing the financialstructures in China and the further financial reform.Besides the Introduction, the paper uses four chapters to analyze the relationshipbetween financial structures and financial stability. In the second chapter, the paperexpounds the theory framework of financial structures and financial stability. Firstly, thepaper discusses the traditional theories about financial structures and financial stability andchoose bank dominant financial structure and market dominant financial structure assubjects. Secondly, the paper, in the perspective of risk sharing, puts forward the theory ofthe relationship between financial structures and financial stability and points out thetheory evidence and analytic path. In the third Chapter, the paper expounds the influencesof different financial structures on financial stability. Firstly, the paper elaborates theclassifying methods of financial structures and measuring index. Secondly, based on the theories, the paper respectively elaborates the two financial structures and theircorresponding rick sharing mechanism and its action principles, comparative advantagesand action conditions. The paper discusses that if the current conditions can not be satisfied,the corresponding risk sharing mechanism can not work, which will lead to financialinstability and even financial crisis. In the process of financial structure marketing,cross-sectional risk sharing mechanism will erode the vertical one. the cross-sectional risksharing mechanism should plays a more important role in financial market, but the fasterthe global economy develops, the higher the globalization, the more hugely thecross-sectional risk sharing will be lashed, and even hardly works in the globally systemicrisks, which reinforces financial instability. In the fouth chapter, the paper, using themultinational data and adopting binary choice model, empirically analyzes the relationshipbetween financial structures and financial crises and tests that financial crisis more easilybreaks out in market dominant financial structures. In the last chapter, the paper comes to aconclusion and puts forwards suggestions on adjusting and optimizing the financialstructures in China. By induction, the paper finds the relationship between financialstructures and financial stability: the cross-sectional risk sharing mechanism plays moreand more important roles, but with the deepening economical globalization the mechanismof the cross-sectional risk sharing will be lashed more heavily with the globalization andthe financial crisis will more easily break out if a state puts more emphasis on marketdominant type, so China should combine bank dominant and market dominant financialstructure and ensure the functioning of the corresponding risk sharing to choose andoptimize the financial structure.