Why does similar and internationally converging financial liberalization result in nationally divergent banking regulations across developing countries? Why are some countries able to establish a set of stringent financial regulations after financial liberalization while others are mired in lax rules and regulatory forbearance? Why do moral hazard, rent-seeking, and fiscal and financial patronage exist even in the most radical and seemingly successful cases of financial liberalization in the developing world? In short, what influences the financial regulatory performance of developing countries in the post-liberalization era?; I argue that an important answer to the questions lies in domestic politics, more specifically, politicians' differing electoral incentives stemming from private financial interests and political institutional constraints. By a comparative analysis of the financial regulatory reform experience of three middle-income countries in the 1990s, Argentina, South Korea, and Thailand, I show that even after the implementation of significant financial liberalization policies, which is supposed to free up finance from political influence, financial regulation still remains one of the central policy areas in which ruling politicians' political and electoral incentives play a predominant role. I argue that the outcomes of post-liberalization financial regulation are critically shaped by the variations in the national configurations of the domestic financial market structure and political institutions.; More specifically, I contend that private resistance to regulatory reform would be stronger when financial market concentration is high, i.e., banks and industry are closely tied and concentrated. Alternatively, if the financial market is organized on a rather competitive basis, the private capacity to influence regulatory policies in accordance with their preferences would be weaker. In the face of domestic and international economic pressure for reforming financial regulations, politicians institutionally constrained by reliance on the use of financial patronage for electoral gains are more likely to resist patronage-reducing regulatory reforms than those whose electoral fortunes are less dependent upon financial patronage. I argue that politicians are likely to have strong demand for financial patronage if electoral rules encourage them to value personal rather than party reputations in elections. I also contend that electoral parties with weak organizational bases are more likely to resort to financial patronage than mass parties that are organizationally strong.; I tested my hypotheses with a comparative analysis of the financial reform episodes of the three countries in the 1990s: Argentina, Thailand, and Korea. My comparative case studies found that cross-national variations in banking regulatory policy outcomes were causally related to the variations in financial market structure and political institutional arrangements.
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