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

Bilin Neyapti and Nazire Nergiz Dincer

Emerging Markets Finance and Trade, 2014, vol. 50, issue 1, 52-70

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.

Keywords: bank performance; bank regulation and supervision (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (9)

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Working Paper: Macroeconomic Impact of Bank Regulation and Supervision: A cross-country investigation (2010)
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