Financial Structure Does Matter for Industrial Growth: Direct Evidence from OECD Countries

We examine the empirical relationship between financial structure and the growth of different industries in various countries. Examining the different financial structures, whether they are market-based or bank-based, of a sample of 26 OECD countries that have achieved some degree of financial development, and classifying 26 manufacturing industries by technological rather than financing characteristics, we find that industries with high R&D intensity, high operating risk, and high capital intensity tend to grow faster in countries that feature a market-based financial system over countries that feature a bank-based financial system. The results of this study imply that the financial structure and the industrial structure of a country need to be congruous for high economic growth.