Do legal and institutional environments matter for banking system performance?

Arias, José; Maquieira, Carlos; Jara, Mauricio

doi:10.1080/1331677x.2019.1666023

Cited by 17 publications

(16 citation statements)

References 73 publications

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“…The banking system's NPE ratio rose to 19.5% at the end of 2013 and presented a systemic risk to financial stability. As performance of the banking system is highly dependent on the legal and institutional environment (Arias et al, 2020), the situation called for action by the supervisor, the Bank of Slovenia (2017). Supervisory requirements and projects that particularly targeted banks' NPEs were introduced.…”

Section: Institutional Setting For Ifrs 9 Implementation In Slovenianmentioning

confidence: 99%

IFRS 9 transition effect on equity in a post bank recovery environment: the case of Slovenia

Groff

Mörec

2020

Economic Research-Ekonomska Istraživanja

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On January 1, 2018, IFRS 9 became effective in the EU. It introduced the expected credit loss model to allow for timely recognition of credit losses, estimated not only on the actual credit loss experience but also on forward looking information related to current loan portfolio. Although the transition to IFRS 9 should lead to increased impairments and decrease in banks' equity, this effect is ambiguous in the settings characterised by combined effects of optimistic macroeconomic outlook and strong regulatory intervention related to extensive loan portfolio restructuring. This paper investigates day-one transition effect of IFRS 9 on level of loan impairments and total equity of banks in Slovenia, Eurozone country, which barely averted international bailout in 2013 by extensive state assisted bank restructuring. The comparative analysis is done on banks that transferred deteriorated loan portfolio to the state's Bank Assets Management Company and all other banks. In line with expectations we find that banks without extensive asset portfolio improvements recognised additional loan impairments on transition to IFRS 9, whereas the opposite effect is observed for banks which performed state-assisted loan portfolio restructuring. Our study provides additional insight on the effect of institutional and regulatory setting on IFRS 9 implementation effects.

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Section: Institutional Setting For Ifrs 9 Implementation In Slovenianmentioning

confidence: 99%

IFRS 9 transition effect on equity in a post bank recovery environment: the case of Slovenia

Groff

Mörec

2020

Economic Research-Ekonomska Istraživanja

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“…The literature provides evidence regarding the positive relationship between institutional quality or corporate governance and firms' access to finance and financial development (Arias, et al, 2019;Bae & Goyal, 2009;Asgharian, et al, 2014;Haque, 2015). This should determine policy makers and regulators develop new policies to establish a competitive legal and regulatory infrastructure to attract foreign capital (Sami, et al, 2011).…”

Section: Discussionmentioning

confidence: 99%

“…To be able to perform its functions properly the institutional environment in which banks activate should be of high quality. High quality institutions reduce the cost of external financing, the main mechanism through which an adequate legal framework favors financial development (Arias, et al, 2019). Djankov et al (2005) studied the effects of creditor rights, referring here to how easily creditors can force repayment, grab collateral or even gain control of the firm legally and the effects of information transparency, as if lenders know more about borrower they will extend credit offer.…”

Section: Impact Of Institutional Quality On Bank Lending Activitymentioning

confidence: 99%

Governance and Access to Finance

MELNIC¹,

JURAVLE²

2020

REBS

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This paper reviews the literature on institutional quality and corporate governance and it assesses the impact of the two levels of governance on firms' access to finance. The literature sustains that both institutional quality and corporate governance are important drivers of bank lending activity and equity financing. Among the institutional quality indicators that proved to be most effective are creditor rights, transparency and contract enforcement. The corporate governance attributes that manifest important effects on firms' financing are the board size, ownership and monitoring of managerial decisions that reduces agency costs. The legal institutional framework and firms' corporate governance influences the level of a country's financial development a complementary manner.

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“…They give a structure to stimuli in exchange, whether political, social, or economic. Institutions responsible for banking regulation and supervision must focus their attention on promoting good corporate governance practices in banking institutions and on providing an appropriate legal and institutional framework to give stability and confidence to the banking system, which is crucial for the proper functioning of the economy as a whole (Arias et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

Managing the institutional environment and impact on the competitiveness of transitional economies

Škare¹,

Radolović²,

Tvaronavičienė³

2021

JESI

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The main unsolved issue in the qualitative research of the "new" institutional economics in the area of the institutional impact on economic growth is how productive institutions occur, i.e., which variables explicitly "stand" behind the institutional "infrastructure" impact on economic growth. The research presents the postulates of the "new" institutional economics, claiming a connection between the institutional structure and the movement of economic growth. Furthermore, the impact of institutional quality on economic growth was analyzed on examples of individual national economies. The comparative method of the assessment based on six criteria: voice and accountability, political stability, government effectiveness, regulatory quality, the rule of law and control of corruption, and the comparison of the GDP per capita of the same as one of the most significant economic indicators, tested the primary hypothesis (H1) in this work: institutions are the fundamental determinant of the long-term success in economy, and the importance of government effectiveness is seen through economic growth, especially long-term growth. The conducted research showed a high level of correlation between institutions' success and the gross domestic product with indications of equal returns per ratio and the fact that the advancement of institutional quality, indirectly through GDP, can lead to the growth of the relative significance of economies.

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Do legal and institutional environments matter for banking system performance?

Cited by 17 publications

References 73 publications

IFRS 9 transition effect on equity in a post bank recovery environment: the case of Slovenia

IFRS 9 transition effect on equity in a post bank recovery environment: the case of Slovenia

Governance and Access to Finance

Managing the institutional environment and impact on the competitiveness of transitional economies

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