The Influence Of Institutional Distance On Financial Development

Marx put forward in the "Capital" the contradictory movement rules of human social development,that is,the interaction between productive forces and production relations.This rule is also applicable to the financial industry.When studying the influencing factors of a country's financial development,it is inseparable from the impact on the country's institutional indicators.This article follows this principle,and studies the financial development of 17 developed countries and 18 developing countries from the perspective of institutional finance."Institutional distance" is an indicator commonly used when studying institutional issues and is used to measure the gap between institutional indicators between sample countries and standard countries.This article introduces this indicator into the research area of financial development,uses this indicator to estimate the standard level of the institutional level,and analyzes the institutional distance between the sample country and the United States,the institutional distance from China,and 35 countries through a panel data model.The impact of the average level of institutional distance on domestic financial development.The institutional distance indicator construction in this paper is divided into economic system distance and legal system distance.The economic system distance is composed of 9 economic system indicators in the global economic freedom index published by The Heritage Foundation;the legal system The distance indicator consists of six legal system indicators in the World Bank's World Governance Index(WGI).In addition to the research on the impact of institutional distance indicators and financial development,this paper also studies the impact of financial development on the two components of institutional distance,namely the economic institutional distance and the legal institutional distance,to determine the impact of institutional distance indicators on financial development.The specific mechanism that influences financial development.However,the direct use of institutional distance as an indicator for financial development research has the problem of the endogenous nature of institutional indicators for financial development.Studies by foreign scholars have shown that different countries generally choose a system suitable for their own financial development,so the choice of system is generally endogenous.In order to solve the endogenous problem of institutional indicators,this paper introduces the first and second lags of institutional distance indicators as instrumental variables based on the characteristics of panel data.Due to over identification,this paper performs dispersion transformation,The GMM estimation method was used for estimation,and the validity of the instrumental variables was tested with under identification test,weak identification test and over identification test to ensure the rationality of the model.The empirical results in this paper show that the regression coefficients of the total institutional distance,economic institutional distance,and legal institutional distance of developed and developing countries on the country's financial development scale and financial deepening degree are negative.This shows that the greater the institutional distance between the developed countries or developing countries and the standard level,the more it will adversely affect the financial development of the country.Based on the measurement results in this paper,the paper draws the following conclusions: First,the distance of a country's external system has an adverse effect on its financial development,that is,the greater the distance of a country's external system,the worse it is for its financial development.Second,the external institutional distance of developed countries has almost no significant impact on the scale of their financial development,and has different effects on the level of financial deepening of developed countries.Third,institutional distance has an obstacle to the scale of financial development and financial deepening in developing countries.Fourth,the institutional distance between developed countries and the United States can significantly affect the financial development of developed countries;the institutional distance between developing countries and China can significantly affect the financial development of developing countries.Finally,in light of China's basic national conditions,the following enlightenments for China's future financial development are as follows: First,to promote the construction of China's property rights system,clarify property rights responsibilities,and strengthen the protection of investor rights.Second,based on the successful experience of the decentralization reform pilots and experimental areas,we will accelerate the nationwide simplified decentralization reform.Third,we will reform our financial institutions to meet China's rapid technological development.