Financial structure and economic growth: A critical review

The purpose of investigation towards the relationship between financial structure and economic growth-the degree to which a country's financial system is market-based or bank-based-is to reveal the relative merits Of market-based and bank-based financial system. The literatures so far both in China and abroad have failed to consider the cultural and institutional influences, which might be important for Chinese researchers to get an insightful conclusion that could generate valuable suggestions for the practitioners. This paper argued that the essence of financial structure is an extension of social division of labor in the financial industry, and empirical study shows that the development of Chinese stock market can explain the growth of China's private sector.