Diversity of Patchwork Capitalism in Central and Eastern Europe by Ryszard Rapacki

Author:Ryszard Rapacki [Rapacki, Ryszard]
Language: eng
Format: epub
ISBN: 9780367727208
Google: yvv5zQEACAAJ
Goodreads: 55834812
Publisher: Routledge
Published: 2021-03-31T00:00:00+00:00

6.1 Measurement of institutions in financial intermediation

Amable (2003) argued that the most appropriate measures to describe the institutional area of financial intermediation include, inter alia, the size of the capital market (as a proportion of GDP) and the value of bank loans to enterprises (as a percentage of GDP). In his study, he separated countries in which the capital market plays a significant role from those that mostly use the banking sector as the source of funding. Hall and Soskice (2001) proposed another institutional measure: the scope of investors’ protection. In their view, this is one of the elements of corporate governance, and by the same token an institution shaping the relations between participants of the capital market. In liberal market economies, problems of corporate governance are solved by market mechanisms. In coordinated market economies, non-market interactions between economic agents are the main pillars of the coordination mechanism, supported by strong links between managers, technical staff and banks; as a result, more complete and reliable information on enterprises is made available, thus mitigating the problem of information asymmetry and the “corporate veil”. Much the same conclusions were arrived at by Vitols (2001). Ozsvald (2014) examined the significance of the state as the owner of firms, which is of particular historical relevance in the CEE11 countries as part of their command-economy legacy and in broader terms, their path-dependence record. Between 1945 and 1989, the state was the owner of all or most of the economic entities. The transfer of ownership into private hands has gradually followed since 1990 as a result of privatization. Although its direction used to be quite similar in the CEE countries, the process of ownership transformation reached divergent stages in individual countries. The role of venture capital financing has been marginal in these countries (McGee, 2007), unlike in the incumbent EU member states where it was quite significant (Oehler et al., 2007). As a result of reforms of the financial intermediation system related to the EU accession, various types of funds, including pension funds, have been gaining in importance as entities operating in the financial sector (Ozsvald, 2014).

The inquiry into the intricacies of institutional architectures of the financial system was made possible thanks to the inclusion to the analysis of many variables that reflect various aspects of key interrelationships prevalent within this sector. These variables describe first of all the significance and the most essential features of two basic sources of financing in the economy (the capital market and the banking system) while at the same time allowing for the role of the state and other actors operating in the financial sector.

Table 6.1 Data sources Variable name

Variable description

Data source

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