Global Journal of Management and Business Research, B: Economics and Commerce, Volume 20 Issue 1

between countries. The recent literature on growth also stresses the role of financial development and the quality of institutions, separately on the one hand and jointly, as fundamental determinants of economic growth. Also, an extensive literature has accumulated in recent years to show that macroeconomic stability and financial liberalization are insufficient for the real deepening of the financial sectors (and thus gaining growth). This literature also shows that other institutional reforms should accompany these policies. By basing their work on the gross domestic product per capita as a measure of economic development, many researchers have concluded that the differences found at the global level could be explained by the quality of the country or the study area. Growth would be high when institutions are functioning well and weak when they are deficient. By improving laws and their application, it is possible to stimulate the economic growth in particular for African countries that are experiencing real deficits in this area. This renewed interest in the institutions follows the work of the new institutional economics, notably those of Douglass North (1990). Indeed, North (1990) defines institutions as the set of rules and standards of a society or, more formally, the constraints established by men who frame and regulate behaviors. These are both formal institutions (such as rules, laws, constitutions) and informal institutions (such as unwritten social behavior standards, conventions, self-imposed codes of conduct). Based on this definition of ' ' Northienne ' ' of institutions, Daron Acemoglu et al. (2004) distinguish economic institutions from political institutions. Economic institutions would structure the rules of the economic game and concern, for example, property rights, the execution of contracts, and the transparency of contracts while political institutions include democracy, bureaucracy, and political stability. It is up to the economic and political institutions to ensure respect for the rules of law, which allow for the proper functioning of the spheres of production and exchange. They consist of formal rules of the game (constitutions, laws, property rights) and informal (customs, traditions, social capital, and rules of conduct, etc.). The objective behind the conception of the institutions is the establishment of a certain order and, therefore, the reduction of the possible uncertainties in the exchange. They can be considered as corporate technologies in the functioning of productive economic activities (Nelson and Sampat, 2001). Many recent studies have emphasized the importance of institutional quality for an economic performance like Rodrik et al. (2004), Hall and Jones (1999), Knack and Keefer (1995), Mauro (1995), a positive relationship between the various indicators of institutional quality and the performance of the economy in general. In the same vein, Pistor et al. (1998) highlight the role of law and legal systems in economic development in Asia in an informative analysis. We now need to be interested in the part of the literature that has sought to report on the relationship between the financial sector and the level of institutional development. Few studies have looked at the exploration of this link. In particular, the current of law and finance whose intellectual leaders are the Porta et al. (1998), the work of Demetriades and Law (2006), Gregorio and Guidotti (1995), Knack and Keefer (1995), Levine and Renelt (1992), Wurgle (2000), Arestis et al. (2002) have all in their way in different studies, with various and varied theoretical and empirical research techniques supported with some close differences, that economies with a legal system that facilitates contracts between agents private and guarantees property rights, are in favor of the accumulation of private capital and the expansion of the financial markets. And conversely, the low-level economies of a legal system suffer from a low incentive to lending activities and financial transactions. They also create a market for non-productive activities such as rent-seeking or bribery, which generate high transaction costs and poor resource allocation. Also, Demetriades and Law in 2006 concluded that, in low-income countries, institutional quality appears to be a fundamental determinant of economic development, more than financial development, and any positive effect of financial development on growth would be weakened without the existence of good institutions. And also, some work goes so far as to condition the impact of financial liberalization policies on the development of the financial system to institutional differences between countries. More recent work such as Gani and Ngassam (2008), Girma and Shortland (2008), Lawand Azman- Sain (2008), Baida et al. (2009), Law and Habibullah (2009), Demetriades and Fielding (2009), Anayiotos and Toroyan (2009), Singh et al. (2009), Beji and Youssef (2010), highlighted the importance of institutions for finance, such as rules of law, political stability, government efficiency and the control of corruption. In these works, the authors used different samples from several countries of economic and geographical zones of the world. By using advanced quantitative techniques, they come to similar conclusions regarding the confirmation of the thesis on which the theory of law and finance rests (La Porta et al., 1998). We see through the results of these works; the institutional quality strongly influences the efficiency of the financial system. Indeed, variables such as the quality of regulation and control, corruption, political instability, protection of rights, in particular, private property rights, are elements in the process of financial development of an economy. In most of these recent studies, recourse to the application of the GMM method in the dynamic panel by the authors is noted. Subsequently, Minea and Villieu (2010) attempted to reproduce this result in an endogenous growth model. They show that when "institutional quality" © 2020 Global Journals 25 Global Journal of Management and Business Research Volume XX Issue I Version I Year 2020 ( ) B Institutional Quality and Financial Development in West Africa Economic and Monetary Union