Political economy theories of financial development argue that in countries where a narrow elite controls political decisions, financial development may be obstructed to deny access to finance to potential competitors. We use panel data on developed and developing countries from 1975-2000 to examine this hypothesis, as well as looking at the effect of regime transitions on financial development. Our results show that the degree of democracy and political stability explain differences in the speed of financial development and that including these regime characteristics makes legal origin variables obsolete.