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What Motivates Financial Innovation Across Countries? The Influences of Performance Aspiration and Economic Freedom

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  • Yiyi Su

    (Tongji University)

  • Steven Si

    (Zhejiang University
    Bloomsburg University of Pennsylvania)

Abstract

Examining behavioral explanations for financial innovation, this paper focuses on the performance aspiration effects on financial innovation in nations with different levels of economic freedom. We empirically test our ideas by employing a dataset of financial innovation by derivative exchanges across 40 countries from 1995 to 2010. Our results show that, for the economically free nations, financial innovation increases as performance deviates from aspiration. In contrast, for the least economically free nations, financial innovation decreases as performance deviates from aspiration. These findings are largely consistent with our predictions and also demonstrate the importance of national context for understanding firm behavioral motivations for financial innovation.

Suggested Citation

  • Yiyi Su & Steven Si, 2015. "What Motivates Financial Innovation Across Countries? The Influences of Performance Aspiration and Economic Freedom," Management International Review, Springer, vol. 55(4), pages 563-587, August.
    • Handle: RePEc:spr:manint:v:55:y:2015:i:4:d:10.1007_s11575-014-0237-0
    DOI: 10.1007/s11575-014-0237-0
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    Cited by:

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