On the Performance of Differently Regulated Financial Institutions: Some Empirical Evidence

Alfred Steinherr and Christian Huveneers
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Alfred Steinherr: European Investment Bank
Christian Huveneers: Catholic Faculties of Namur (FUNDP), Mons (FUCAM), Lille I, Free University of Brussels (ULB)

No 1992021, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The paper raises two questions about the industrial economics of banking : first, why are financial market configurations so different across nations ? We discuss the theoretical arguments by following the sequence Regulation-Structure-Performance (section 2). Second, do the differences in regulation and structure matter ? Section 3 provides empirical evidence pertaining to that question. Throughout the paper we refer to two polar cases of financial systems : market (M)-and bank (b)- based systems. As for banks, we distinguish between specialised and universal banks. Universal banking is a particular institutional representation of B-systems. A first empirical test relating macroeconomic growth to financial variables suggests that these variables matter. We then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance. We conclude that universal banks achieve a better risk-return trade-off, due to superior monitoring and information collection capacity.

Keywords: banks; financial market; regulation (search for similar items in EconPapers)
Pages: 35
Date: 1992-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1992021

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