Macroeconomic Impact of Bank Regulation and Supervision: A Cross-Country Investigation

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Neyapti B., Dinçer N. N.

EMERGING MARKETS FINANCE AND TRADE, vol.50, no.1, pp.52-70, 2014 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 50 Issue: 1
  • Publication Date: 2014
  • Doi Number: 10.2753/ree1540-496x500103
  • Journal Name: EMERGING MARKETS FINANCE AND TRADE
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.52-70
  • Keywords: bank performance, bank regulation and supervision, GROWTH, DETERMINANTS, OWNERSHIP, QUALITY
  • TED University Affiliated: Yes

Abstract

Bank regulation and supervision (RS) is a formal institutional mechanism that aims to reduce the adverse selection and moral hazard risks in the banking sector. This paper offers an empirical exploration of the relationship between banking-sector performance and RS using data on the legal quality of bank regulation and supervision. The main channels via which RS affects bank performance are considered to be depositor trust, investment mobilization, and borrower discipline. An event study of up to fifty-three countries provides robust evidence that RS has significant positive effects on bank deposits and investment rate and significant negative effects on nonperforming loans.