Does institutional quality condition the impact of financial stability transparency on financial stability?

van Duuren, Tim; de Haan, Jakob; van Kerkhoff, Henk

doi:10.1080/13504851.2019.1707762

Cited by 18 publications

(7 citation statements)

References 10 publications

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“…The more financial institutions become illiquid, the more vulnerable they become, hence widening the gap in financial stability. This also confirms the findings of Van Duuren et al (2020), who identified NPLs as a key driver of financial stability among a sample of 110 countries. This finding is crucial and demands immediate and appropriate address as banking or financial systems with too many NPLs have detrimental economic and social impacts.…”

Section: Econometric Estimatessupporting

confidence: 89%

“…Fahr and Fell (2017) stress that the financial stability gap can be closed through the use of macroprudential policies but not necessarily through a monetary policy. Also serving as the basis for this study, liquidity challenges with the financial institutions hinder their basic role in the economy and make them vulnerable to external shocks (Kulu et al, 2022b;Van Duuren et al, 2020;Almarzoqi et al, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Drivers of financial stability gap: evidence from sub-Saharan Africa

Kulu,

Osei

2023

JFEP

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Purpose As an effort to support the quest for a stable financial sector, this study aims to determine the factors that contribute to the financial stability gap in sub-Saharan Africa (SSA). Design/methodology/approach The estimation techniques used include the fixed and random effect, system general methods of moments and dominance analysis. The data used is annual data for 33 SSA countries, covering the period 2007 to 2018. Findings Key findings from the analyses indicate that nonperforming loans increase gaps in financial stability while regulatory quality, control of corruption, political stability and appreciation of the local currency reduce the financial stability gap in SSA. Research limitations/implications The absence of a specific metric for measuring the financial stability gap appears to be the limitation of this study. Its existence could improve the discussion and also make replicability easier. However, this study relies on a measure introduced by Kulu et al. (2022b), which is also acceptable and quite popular in the literature. Originality/value To the best of the authors’ knowledge, this study is the first in the finance literature to estimate the determinants of the financial stability gap in SSA.

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Section: Econometric Estimatessupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Drivers of financial stability gap: evidence from sub-Saharan Africa

Kulu,

Osei

2023

JFEP

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“…Some studies such as Elfeituri (2022) have shown that institutional quality positively impacts bank stability. Besides Van Duuren et al (2020) using a fixed-effects panel model on data from 110 countries from 2000 to 2011, the study finds that previous findings suggest that financial transparency improves financial stability. However, the findings indicate that financial transparency is only negatively related to bad loans made by banks with low institutional quality.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 71%

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Son

Nguyen

2022

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Purpose The purpose of this study is to carry out an empirical investigation about how the level of market concentration or competitiveness of the banking system and institutional quality are associated with bank’s financial stability. Design/methodology/approach This study uses dynamic panel data techniques on the sample of 133 developing and emerging countries over the years 2002–2020. Findings The authors document several significant findings. First, there is evidence that bank stability is positively associated with the level of market concentration. The result is in line with the concentration–stability view that banks operating in a more concentrated market tend to be more stable than those in a less concentrated market. Second, the results confirm that the quality of the institutional environment plays a critical role in improving the stability of banks in developing and emerging countries. Third, the authors find that institutional development can moderate the effect of market concentration (or competitiveness of the banking system) on bank stability. Specifically, the results show that better institutional quality enhances the positive influence of bank concentration on the bank’s financial stability in developing and emerging countries. These results are robust to different specifications with the alternative measures of bank stability and market concentration. Originality/value This study provides further understanding regarding the effects of the level of market concentration or competitiveness of the banking system and institutional quality on bank stability in 133 developing and emerging countries over the years 2002–2020.

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“…These method has been used by the majority of studies listed in our literature review above, e.g. Chiuri et al (2002), Francis and Osborne (2012), Karmakar and Mok (2015), Aiyar et al (2016), Ben Naceur et al (2018), Tresierra and Reyes (2018), El Hourani and Mondello (2019), and van Duuren et al (2020). Note that the Fixed Effects method allows taking into consideration the bank-specific effects in the estimations by including individual intercepts for each cross-section.…”

Section: Methodology and Variables Specificationsmentioning

confidence: 99%

“…2. This is beside other aspects, mainly the association between institutional quality and banking stability (see for instance Essid et al , 2014; Silva and Chávez, 2015; van Duuren et al , 2020), and financial inclusion (see Bongomin et al , 2018), and financial development (see Hamadi and Awdeh, 2020). …”

Section: Notesmentioning

confidence: 98%

Capital requirements, institutional quality and credit crunch in the MENA region

Awdeh

EL-Moussawi

2021

IJOEM

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PurposeThe introduction of Basel capital adequacy standards (I, II and III) has provoked a large body of empirical and theoretical literature that aimed to detect the consequences of risk-based capital rules on bank lending behaviour and credit availability (and the possible emergence of the credit crunch phenomenon), and came up with divergent conclusions. This study aims at participating in this continuous debate but detecting the applicability of the credit crunch theory in the MENA region, taking into consideration the impact of the institutional environment, which may play a role in mitigating the supply-side credit crunch.Design/methodology/approachThis study exploits the Fixed Effects method on a dataset of 210 banks from 14 MENA countries over the period 1999–2016. The paper exploits the percentage change in bank credit as a dependent variable, capital requirements and three institutional quality variables as explanatory variables, in addition to a set of micro- and macro-economic variables.FindingsThe study finds that the implementation of higher capitalisation ratios does participate in a significant decline in bank credit supply. Additionally, by testing the impact of institutional factors on bank lending, it reveals that good governance and political stability encourage banks to extend credit and soften the credit crunch, while higher level of financial freedom discourages banks from expanding loan supply and even magnifies the decline of credit following tightening capital requirements.Practical implicationsThis paper provides very important insight for MENA policymakers and bank regulators by highlighting the importance of the institutional environment factors in amplifying or softening the effect of higher capital requirements in their economies.Originality/valueIn addition to examining an understudied sample of countries, this paper's originality and value added are represented mainly by testing the impact of institutional environment and governance level on bank lending behaviour.

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Does institutional quality condition the impact of financial stability transparency on financial stability?

Cited by 18 publications

References 10 publications

Drivers of financial stability gap: evidence from sub-Saharan Africa

Drivers of financial stability gap: evidence from sub-Saharan Africa

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Capital requirements, institutional quality and credit crunch in the MENA region

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