Do formal and informal institutions shape the influence of sustainable banking on financial development?

Fernando Úbeda, Francisco Forcadell and Nuria Suárez

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: This paper explores the moderating role of formal and informal institutions on the sustainable banking and financial development link. We compute an aggregated measure of sustainability in the banking sector for a sample of 46 countries for the period 2010-2018. Our results indicate that sustainable banking positively influences financial development only in countries with strong formal institutions. Nevertheless, informal institutions can generate the necessary trust in the banking sector, allowing the positive effect of sustainable banking on financial development in countries with weak formal institutions. The results are robust after controlling the potential endogeneity issues.

Keywords: Sustainable banking; Financial development; Formal and informal institutions; Trust; Culture; Reputation (search for similar items in EconPapers)
JEL-codes: G00 G21 K00 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321003913

DOI: 10.1016/j.frl.2021.102391

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