institutions is greater. In other words, both banks and stock markets are larger, more active and more efficient in richer countries. Also, stock markets (relative to banks) become more active and efficient in higher-income countries. Finally, the authors examined financial structure relative to legal, regulatory, tax, and macroeconomic determinants and found that countries having a "Common Law tradition<sup>227</sup> , strong protection for shareholder rights, good accounting standards, low levels of corruption, and no explicit deposit insurance tend to be more market-based, even after controlling for income. On the other hand, countries with a French Civil Law tradition, poor protection of shareholder and creditor rights, poor contract enforcement, high levels of corruption, poor accounting standards, heavily restricted banking systems, and high inflation tend to have underdeveloped financial systems in general, even after controlling for income."<sup>228</sup> Some of these findings are presented in Table 5.16 below for selected countries.

Table 5.16

|Indicator|sofFinancialDevelo|ment,FinancialStruct|ureandthe**Le**|al**System**|acrossCoun|tries|
|---|---|---|---|---|---|---|
|Country|Finance-activity|Structure-actvity|**AntI-director**|Creditor|Ruleof**law**|**Legal**origin|
|India|-4.35|-1.61|**5**|<br>4|2.50|E|
|Japan|-0.43|-1.00|4|2|5.39|G|
|Malaysia|-1.08|-0.32|**4**|**4**|4.07|E|
|Philippines|-4.17|-1.47|**3**|**0**|1.64|F|
|Thailand|-1.98|-0.92|**2**|<br>3|3.75|E|
|Australia|-2.14|**-1.18**|4|**1**|6.00|E|
|NewZealand|-3.14|-1.64|4|**3**|6.00|E|
|Denmark|-3.63|**-1.87**|**2**|<br>**3**|**6.00**|S|
|France|-2.57|-2.28|**3**|<br>**0**|5.39|F|
|Germany|-1.76|-1.52|1|<br>**3**|5.54|G|
|**Italy**|-3.89|-2.52|**1**|<br>**2**|5.00|F|
|**Switzerland**|0.55|-0.39|**2**|1|6.00|G|
|United**Kingdom**|-1.33|-0.74|5|**4**|**5.14**|E|
|UnitedStates|-0.80|-0.64|**5**|**1**|**6.00**|E|
|NOTES:<br>Finance-actvity=Indica<br>Structure-aclvlty=Indic<br>Creditor=Indexofdegre<br>d acompany. Ranges|toroffinancialdevelopment;<br>atoroffinancialstructure;a<br>etowhichlegalcodesofa<br>from0to 4 with0beinglow|ameasureofoverallactivit<br> measureoftheactiMtyof s<br> countryprotectdalmsofse<br>est|yoffinancialIntem<br>tockmarketsrelativ<br>cured creditorsIn|iediariesand<br>etotheactiv<br> caseofreorga|markets.<br>tyofbanks.<br>nzationorriquida|Uon|

Ant-director = Index of degree to which legal codes of a country protect minority sharehdder rights. Ranges from.0 to 6 with 0 lowest. Rule of law = Assessment of law and order tradition of a country. Ranges from 10 (strong law & order tradlUon) to 1 (weak tradition) Legal origin: E = BitUsh, F = French, G = German, S = Scandinavlan _Source:_ **_Beck._** _Demirguc-Kunt, Levine,_ **_and_** _Maksimovlc (2001:_ **_Table_** _SAI, Appendr_ **_5.1,_** _234-230)_ In financial development<sup>22 9</sup> (represented by the indicator 'Finance-activity' in the above table), Switzerland has the highest value and India, the lowest. Although too few countries are included to make an overall assessment of the Asian region, the results are as might be expected in that Japan's financial development is highest among those listed while India and the Philippines are at the low end with Malaysia and Thailand in between.

'Structure-activity' gives an indication of a country's financial system being more market-based or bank-based relative to other countries in the sample.<sup>230</sup> The remaining 86