Rule Of Law,government Behavior, And Regional Financial Development Sustainability: New Evidences From China In Transition

As the concept of sustainable development continues to deepen,numbers of research scholars at home and abroad point out the important role of financial development sustainability.Sound and financial development sustainability is essential to achieve harmonious interaction between economic growth,social stability and environmental support for the transition economy.The determinant of the regional gap in financial development sustainability is among the current research frontiers of financial sustainability.Existing research scholars find that rule of law plays an important role on financial development sustainability.Meanwhile,government behavior also plays a special power to promote the development of financial sustainability.Using the data from 31 provinces in China during 2005-2014,this paper offers a first attempt to explore the influences of rule of law and government behavior on financial development sustainability by building a relative index measuring financial development sustainability.The results show that,without considering government behavior,the improvement of rule of law has a positive effect on regional financial development sustainability.Government behavior with different characteristics can lead to significantly different effects on regional financial development sustainability,for protective or predatory government behavior has a negative effect on financial development sustainability.And a positive effect from aggressive government behavior is also significant.But government behavior could partly crowd out or even completely substitute the positive effect of rule of law on regional financial development sustainability.Finally,we study the relationship between rule of law and government behavior,and discover the improvement of rule of law can restrain government intervention(even predatory behavior),then indirectly promote regional financial development sustainability.The robustness tests also confirm above conclusions.We conclude that government's dominant role in promoting financial development sustainability must be understood firstly before attempting to understand differences in China's regional financial development sustainability and how rule of law affects regional financial development sustainability.This paper provides new evidence for the research of mainstream “sustainability” and “law and finance”.