Financial Structure, Corporate Savings and Current Account Imbalances
Zhibo Tan,† Shang-Jin Wei,‡ Yang Yao,† and Yue Zhao†
No. E2013003 June6, 2013
Abstract We explore the effects of a country’s financial structure on its corporate savings and current accounts. A financial system that relies relatively more on banks and less on the capital market presents more difficulties for small and medium-sized enterprises to access external finance. These firms find it necessary to accumulate more savings on their own. As a result, countries that rely on a less developed capital market are more likely to run current account surpluses (or smaller current account deficits). Using panel data of 66 countries for the period 1990-2007, we find consistent and robust evidence in favor of this hypothesis. Further explorations based on firm-level data reveal that firms, especially smaller firms, in economies with relatively under-developed capital markets do save significantly more than their counterparts in countries with relatively more developed capital markets.
Keywords Current account imbalances; Corporate savings; Financial structure; Firm heterogeneities
JEL classification F32; G15; G32
No.E2013003.pdf
