Financial inclusion and legal system quality: are they correlated?

Abstract

PurposeThis study investigates the correlation between financial inclusion and legal system quality.Design/methodology/approachPearson correlation analysis was used to assess the correlation between financial inclusion and legal system quality.FindingsThe author finds evidence for a positive correlation between financial inclusion and legal system quality. The findings suggest that improvements in legal system quality go hand in hand with improvements in the level of financial inclusion. More specifically, higher supply of ATM per 100,000 adults is correlated with stronger insolvency resolution framework among G7, European and non-European countries. Also, the number of bank branch per 100,000 adults is positively correlated with strong rule of law and legal rights in non-European countries. Also, the number of ATMs per 100,000 adults is positively correlated with strength of insolvency resolution framework and negatively correlated with the time it takes to resolve insolvency before, during and after the global financial crisis.Originality/valueNo study has explicitly analyzed the correlation between financial inclusion and legal system quality. This present study contributes to the literature by filling this research gap.