2.1. Financial Development
Financial development takes place when credit tools, markets and intermediaries lower the information, execution and exchange costs, yet avoid removing them. Financial development thus covers the followings:
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Generation of information about possible investments
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Supervising the investments and implementing the rulings of companies
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Exchange, dispersion and management of risks
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Allocation of savings
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Exchange of goods and services (Leven Rose, 2003)
Factors influencing the levels of financial developments in a country also include historical factors such as legal, historical, cultural, ethical, geographical and political components which in turn cover the political environment and macro economy, institutional, legal and information infrastructures, regulations and supervisions, financial liberation and easier access to financial and credit services.
The financial system of a country is comprised of diverse financial markets, tools and products. Financial development, therefore, is a multi-dimensional which, in addition to the development of banking sector, covers non-financial development, developments of monetary sector and policy-making, banking regulations and supervisions, openness of the financial sector, institutional environments and stock exchange development (Dehmordeh and Shokri, 2009).