In this paper, we examine the empirical link between the structural characteristics of the financial system and financial crisis. We find that there is a significant short-term reversal in development of the banking sector and stock market during both bank crises and market crashes, with the bond market moving the same direction as bank credit. The result, however, is significant for market-based countries but not significant for bank-based countries. As emerging markets are mainly bank-based it may provide an explanation why it takes more time for them to recover from economic downturn after a crisis. As the financial reform did not make much contribution to alleviate the crises, we argue that it needs to concentrate on a more diversified financial system.