Essays on institutions and finance

This thesis explores the role of institutions in corporate governance, financial development and financial crises around the world. The first chapter exploits the variation in ownership concentration provided by different privatization methods in Ukraine to investigate the effects of ownership concentration on enterprise performance in a country with weak institutions of investor protection. For a sample of medium and large enterprises, concentration of ownership by non-state owners is found to be positively associated with enterprise performance. It also finds that concentration of ownership by foreign companies and banks is associated with better performance as compared to ownership concentrated by the domestic owners.; Chapter 2 investigates the relative roles and significance of laws on investor protection and institutions as determinants of financial development. For a sample of post-colonial countries, it finds that countries with better institutions have developed larger financial markets, and finds no empirical evidence that differences in law have had significant effects on financial development. The chapter also finds that civil law countries have less developed financial markets as compared to common law countries due to their lower quality of institutions. The chapter suggests that reform of corporate law might be insufficient to jumpstart financial development in developing countries. Instead, those countries should address their broader institutional constraints.; The third chapter, jointly written with Yunyong Thaicharoen, explores the effects of institutions on the magnitudes of currency crises around the world. For a sample of post-colonial countries, the variation in institutions explains more than seventy percent of the variation in the magnitudes of the largest one-year real exchange rate depreciations during the period from 1980 to 1999. This relationship between institutions and the severity of crises is robust to changes in the definition of a crisis, to inclusion into the regressions of the variables used in previous research on currency crises, and to a number of additional controls. It also finds that this relationship between institutions and crises is a phenomenon of the 1980s and 1990s, the period of a major upsurge in international capital flows.