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Financial systems around the globe - Essay Example

Finance & Accounting
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It is generally observed that financial systems around the globe perform similar functions, yet when we examine them closely we find that how and what they contribute in their growth-inducing role is markedly different. Evaluate and discuss this statement…

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Financial systems around the globe

Nowadays, there is a considerable change in these methods as the concepts of transaction cost and use of full information are removed and intimidation has increased in today’s financial market. It’s difficult to bring these changes with the traditional method of financing growth. There is also a tendency in the direction of cross border merger and acquisitions among great financial service firms in diverse nations. These cross border merger and acquisitions frequently engage big universal sort of institutions that give numerous types of financial services to multiple nations. There are two basic methods, which are used nowadays, which are bank intermediation based method and market based financial system (Leyland and Pyle 1977). We know that there is a diversification of financial systems in different countries. Most of these countries have bank intermediations and market based financial systems but the importance of these systems is comparatively different from each other. United States has “market based financial system”. The financial market has an important role in the financial environment of the country and the banks’ intimidation is insignificant (Leviene 2002). Germany has “bank intimidation based” financial market. In such financial environment, banks control the allocation of credit and financial markets are not as important as in US. Besides this is confirmed that the financial systems vary from one another according to different countries and due to this, the financial growth rate is also different for each country according to their selection of the financial system. ...
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