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Industrial Policy and DevelopmentThe Political Economy of Capabilities Accumulation$
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Mario Cimoli, Giovanni Dosi, and Joseph E. Stiglitz

Print publication date: 2009

Print ISBN-13: 9780199235261

Published to Oxford Scholarship Online: February 2010

DOI: 10.1093/acprof:oso/9780199235261.001.0001

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A Question of Trust: Historical Lessons for Current Development

A Question of Trust: Historical Lessons for Current Development

(p.424) 16 A Question of Trust: Historical Lessons for Current Development
Industrial Policy and Development

Colin Mayer

Oxford University Press

This chapter examines contemporaneous and historical evidence on the structure of financial systems in their relation with industry to draw lessons from the development of financial systems in developing economies. It discusses the role that equity markets and finance have played in early stages of development of currently industrialized countries, such as Britain and Germany, and observes that the access by industry to financial resources occurred largely in the absence of formal systems of regulation. Instead, relationships based on the local proximity of investors and institutions, such as banks and coordinators, appeared to have been important in sustaining conditions of trust. This suggests that the preconditions for the development of financial systems may be informal relations of trust between investors and enterprises rather than formal regulation. Investor protection may not always be sufficient or even appropriate while greater attention should be given to the factors that promote such trust relations.

Keywords:   financial systems, corporate governance, regulation, trust, trust relations, equity markets

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