Does institutional quality enhance or weaken the effect of bank regulations and supervision on bank stability? We use a sample of around 1,050 commercial banks from 69 emerging and developing economies over the 2004-2013 period and show that the answer to this question depends on the type of institutional quality and on the type of bank regulation. Political stability strengthens the positive effect of capital regulation and activities restrictions on bank stability as measured by the z-score. Control of corruption also enhances the positive effect of activities restrictions on stability. On the other hand, the positive effect of capital regulation and private monitoring on stability subdues when good quality institutions that induce loan repayment, such as strong creditor rights and the rule of law, are present. Finally, we do not find strong evidence that the negative effect of supervisory power on bank stability is conditioned by institutional quality. In further analysis, we disaggregate the z-score measure and find that institutional quality conditions the effect of bank regulations on stability more by affecting profit stability and profitability rather than by influencing capitalisation. These findings could be useful for bank regulators in emerging and developing economies in the light of the implementation of the Basel III accord.

Using a conviction-based measure, we find that local (state-level) public corruption exerts a negative effect on the lending activity of US banks. Our baseline estimations show that the difference in public corruption between, for example, Alabama, where corruption is high, and Minnesota, where corruption is low, implies that banks headquartered in the former state grant 0.55% less credit (or $3.52 million for the average bank) ceteris paribus. Using proxies for relationship lending and monitoring, we also find that these bank characteristics weaken the negative effect of public corruption on lending. These results are robust to tests that address endogeneity, to the use of perception-based measures of corruption, and after controlling for credit demand conditions. In further analysis, we show that these effects are more evident for smaller banks and banks operating in a single state. These findings provide evidence that public corruption could facilitate information asymmetry in the lending market and, thus, could hinder local development by reducing bank credit.

We examine the association of the Bitcoin price crash risk with economic uncertainty and behavioral factors. We show that economic uncertainty displays a negative and significant association with Bitcoin price crash risk, indicating that when economic uncertainty is high, the crash risk of Bitcoin is low. We also find that behavioral factors have a weak association with Bitcoin crash risk. Our results suggest that investors can hedge economic uncertainty by investing in Bitcoin.

We examine the association of the Bitcoin price crash risk with economic uncertainty and behavioral factors. We show that economic uncertainty displays a negative and significant association with Bitcoin price crash risk, indicating that when economic uncertainty is high, the crash risk of Bitcoin is low. We also find that behavioral factors have a weak association with Bitcoin crash risk. Our results suggest that investors can hedge economic uncertainty by investing in Bitcoin.

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