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Does institutional quality condition the effect of bank regulations and supervision on bank stability? Evidence from emerging and developing economies

Bermpei, T., Kalyvas, A.N., Nguyen, T.C. (2018) Does institutional quality condition the effect of bank regulations and supervision on bank stability? Evidence from emerging and developing economies. International Review of Financial Analysis, 59 . pp. 255-275. ISSN 1057-5219. (doi:10.1016/j.irfa.2018.06.002) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:100410)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
https://dx.doi.org/10.1016/j.irfa.2018.06.002

Abstract

Does institutional quality enhance or weaken the effect of bank regulations and supervision on bank stability? We use a sample of around 1050 commercial banks from 69 emerging and developing economies over the 2004–2013 period and show that the answer to this question depends on the type of institutional quality and on the type of bank regulation. Political stability strengthens the positive effect of capital regulation and activities restrictions on bank stability as measured by the z-score. Control of corruption also enhances the positive effect of activities restrictions on stability. On the other hand, the positive effect of capital regulation and private monitoring on stability subdues when good quality institutions that induce loan repayment, such as strong creditor rights and the rule of law, are present. Finally, we do not find strong evidence that the negative effect of supervisory power on bank stability is conditioned by institutional quality. In further analysis, we disaggregate the z-score measure and find that institutional quality conditions the effect of bank regulations on stability more by affecting profit stability and profitability rather than by influencing capitalisation. These findings could be useful for bank regulators in emerging and developing economies in the light of the implementation of the Basel III accord. © 2018 Elsevier Inc.

Item Type: Article
DOI/Identification number: 10.1016/j.irfa.2018.06.002
Uncontrolled keywords: Bank stability; Bank regulation and supervision; Institutional quality; Emerging and developing economies
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Southampton (https://ror.org/01ryk1543)
Depositing User: Nikolaos Antonios Kalyvas
Date Deposited: 19 Apr 2023 09:53 UTC
Last Modified: 21 Apr 2023 14:41 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/100410 (The current URI for this page, for reference purposes)

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