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Examining Appropriateness of the Regulatory Restrictions on the Banking Ownership of an Insurer Held by Industrial Firm

  • Journal of Insurance and Finance
  • 2005, 16(2), pp.119-152
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

Keun Ock Lew 1

1서울과학기술대학교

Accredited

ABSTRACT

The paper investigates difference in regulations of various countries on the mixing of industrial firms and banking to evaluate appropriateness of the Korean government's restrictions on banking ownership of domestic insurers held by non-financial firms. This study also examines empirically if the regulatory restrictions on the mixing affects positively the development of financial system of a country. The empirical test is done by regression analysis using financial data for 53 countries surveyed by the World Bank. The investigation results hardly accept our traditional belief that the mixing should not be allowed for the sound development of financial industry and the efficiency of resource allocation. The restrictive regulation is simply adopted by some countries such as the United States while other nations including many European countries do not put any limitation on the mixing. This paper also finds that such regulatory restriction do not make any contribution to the development of banking system and financial efficiency. Therefore the government's regulation seems redundant.

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