Central banks' supervisory guidance on corporate governance and bank stability: Evidence from African countries

Samuel Mutarindwa (), Dorothea Schäfer and Andreas Stephan

Emerging Markets Review, 2020, vol. 43, issue C

Abstract: This paper focuses on the identification of the causal relationship between central banks' supervisory guidance and individual bank stability. We propose and test the hypothesis that this causal relationship is mediated by the degree to which banks comply with their central bank's corporate governance recommendations. Specifically, we exploit the fact that there is considerable cross-country heterogeneity in providing supervisory guidance. Our recursive two-equation system is equivalent to an endogenous treatment effect model in which the treatment is the provision of supervisory guidance. We find that institutional factors, in particular the legal family of origin, political stability, contract enforcement and strength of investor protection promote provision of supervisory guidance. If a central bank has published supervisory guidance, local banks show better internal governance and higher stability.

Keywords: African banks; Central bank; Supervisory guidance; Corporate governance; Legal systems; Institutions; Bank stability (search for similar items in EconPapers)
JEL-codes: G21 G28 G30 G32 G38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014119305114
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Central banks' supervisory guidance on corporate governance and bank stability: Evidence from African countries (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:43:y:2020:i:c:s1566014119305114

DOI: 10.1016/j.ememar.2020.100694

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().