Financial development and governance relationships

SAYILIR Ö., Dogan M., Soud N. S.

APPLIED ECONOMICS LETTERS, vol.25, no.20, pp.1466-1470, 2018 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 25 Issue: 20
  • Publication Date: 2018
  • Doi Number: 10.1080/13504851.2018.1430311
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.1466-1470
  • Keywords: Financial development, economic development, financial markets, governance, structural equation modelling
  • Anadolu University Affiliated: Yes


In any country, financial development has a huge influence on country's economic developments. Financial development strengthens financial stability of countries and enhances deep and broad access to capital and financial services by improving efficiency of financial markets and effectiveness of financial intermediation. The purpose of this study is to identify the relationships between various aspects (pillars) of financial development and dimensions of governance for countries listed in the Financial Development Index of the World Economic Forum. The Index provides a score for the breadth, depth and efficiency of 62 of the world's leading financial markets. The study utilized the data from the World Economic Forum presented in the financial development report (2012) and attempted to model the relationships between various pillars of financial development and dimensions of governance by structural equation modelling (SEM) methodology. The study used the Worldwide Governance Indicators for year 2012 of the World Bank as the measure of governance. According to the SEM results, there seems to be a significant positive relationship between governance and financial development. Thus, as governance is enhanced, we may expect financial development to strengthen as well.