Financial Market Regulation, Imperfect Capital Markets, and Industrial Concentration: Mexico in Comparative Perspective, 1830-1930

This article argues that there is a strong relationship between the efficiency with which a country mobilized capital for industrial development and the industrial structure that country developed. Differences in capital market development were a function of government regulatory policies and the costs of obtaining information. The analysis suggests that the development of financial institutions was not endogenous to the process of economic growth. In the case of Mexico, tight government regulatory policies coupled with high information costs gave rise to highly imperfect capital markets, which in turn were transmuted into imperfections in product markets.

Related lending and banking development

Does related lending have positive or negative effects on the development of banking systems? This paper analyzes a unique cross-country data set covering 74 countries from 1990 to 2007, and finds that related lending, on average, does not have any effect on the growth of credit. The authors do find, however, that there are conditional relationships: related lending tends to retard the growth of banking systems when rule of law is weak, while it tends to promote the growth of banking systems when rule of law is strong. They also find that related lending appears to be associated with looting when banks are owned by non-financial firms, but that it does not when non-financial firms are owned by banks. The results indicate that whether related lending is positive or pernicious depends critically on the institutional context in which it takes place; there is no single"best policy"regarding related lending. These findings are robust to alternative specifications, including instrumental variable regressions.Banks&Banking Reform,Debt Markets,Bankruptcy and Resolution of Financial Distress,Labor Policies,Economic Theory&Research

La economía mexicana, 1830-1940: Obstáculos a la industrialización (I)

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La economía mexicana. 1810-1940: obstáculos a la industrialización (II)

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Concentración industrial, desarrollo del mercado de capitales y redes financieras basadas en el parentesco: un estudio comparado de Brasil, México y los Estados Unidos, 1840-1930 (2.ª parte)

Editada en la Universidad Carlos IIIEste artículo aborda la relación entre el desarrollo del mercado de capital y la estructura industrial durante las primeras etapas de la industrialización a partir de las experiencias de Brasil, México y los Estados Unidos. En él se arguye que las dos restricciones básicas a la formación de intermediarios crediticios en América Latina, una mala definición de derechos de propiedad y la intervención estatal, produjeron una concentración más alta en el textil algodonero de México y Brasil que en el de Estados Unidos.This article examines the relatíonship between capital market development and industrial structure during the early stages of industrialization, contrasting the experiences of Brazil, México, and the United States. It argues that the two constraints placed on the formation of credit intermediaries in Latin America, namely, poorly defined property rights and govemment regulatory policies, produced greater concentration in the Mexican and Braxilian cotton textile industries than that which developed in the United Stares.Publicad

Bank Accounting Standards in Mexico. A layman’s guide to changes 10 years after the 1995 bank crisis

After the 1995 crisis, the Mexican banking system experienced significant changes in bank accounting standards. Most of these changes took place between 1996 and 2001, and had a significant impact in the structure and interpretation of financial information of banks. This document explains the major changes on bank accounting, their purpose and structure, and discusses their impact on financial information reported by Mexican banks. It also provides the English equivalent of the major accounting terms used by Mexican banks. The main purpose of this document is to provide a standardized guide to better understand financial information produced before and after the crisis, within the current context of internationalization of Mexican banks' ownership.

These Are the Good Old Days: Foreign Entry and the Mexican Banking System

In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico’s largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks. The result has been a dramatic shift in the ownership structure of Mexico’s banks. For instance, while in 1991 only one percent of bank assets in Mexico were foreign owned, today they control 74 percent of assets. In no other country in the world has the penetration of foreign banks been as rapid or as far-reaching as in Mexico. In this work we examine some of the important implications of foreign bank entry for social welfare in Mexico. Did liberalization lead to an increase (or decrease) in the supply of credit? Did liberalization lead to an increase (or decrease) in the cost of credit? Did liberalization lead to an increase (or decrease) in the stability of the banking system? In order to answer these questions, we must first ask, “increase (or decrease), measured on what basis?” There are, in fact, two distinct conceptual frameworks through which one can assess the impact of foreign bank entry. One is concerned with measuring the short-run impacts of foreign entry on credit abundance, pricing, and observable stability using reduced form regressions. The other is an institutional economics conception of how to measure performance. It is focused on understanding whether foreign entry gave rise to difficult-to-reverse changes in the political economy of bank regulation, which will affect competition and stability in the long term, outside the period that may be observed empirically. We employ both conceptions in this paper

The Political Economy of Financial Systems

This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms.The theoretical literature on the institutional basis for financial development and the recent evidence suggests that unconstrained political power undermines financial accumulation. Even under limited government, unaccountable institutions lead to regulatory capture, favor connected interests, and undermine finance access and entry. Thus the degree of access to political rights by citizens thus strongly affects their access to finance. Finally, we review the recent literature on the time variation of financial development across democracies during the XX century