Post-crisis regulatory reforms and bank performance: lessons from Asia

Barbara Casu, Bimei Deng and Alessandra Ferrari

The European Journal of Finance, 2017, vol. 23, issue 15, 1544-1571

Abstract: Based on a large dataset from eight Asian economies, we test the impact of post-crisis regulatory reforms on the performance of depository institutions in countries at different levels of financial development. We allow for technological heterogeneity and estimate a set of country-level stochastic cost frontiers followed by a deterministic bootstrapped meta-frontier to evaluate cost efficiency and cost technology. Our results support the view that liberalization policies have a positive impact on bank performance, while the reverse is true for prudential regulation policies. The removal of activities restrictions, bank privatization and foreign bank entry has a positive and significant impact on technological progress and cost efficiency. In contrast, prudential policies, which aim to protect the banking sector from excessive risk-taking, tend to adversely affect banks’ cost efficiency but not cost technology.

Date: 2017
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DOI: 10.1080/1351847X.2016.1177566

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