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The impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings: A cross-country analysis

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Author Info
Fotios Pasiouras
Chrysovalantis Gaganis
Constantin Zopounidis ()

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Abstract

We use country level data and bank level data from 71 countries and 857 banks to investigate the impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings. The results indicate that less cost efficient banks, with higher than average levels of provisions relatively to their income, and lower liquidity tend to have lower ratings. Larger and more profitable banks tend to obtain higher ratings. Higher equity to assets ratio results in higher ratings only when we do not control for bank supervision and regulations. Capital requirements, restrictions on bank activities, official disciplinary power, explicit deposit insurance scheme, higher deposit insurer power, liquidity and diversification guidelines, entry requirements, fraction of entries denied, and economic freedom have a significant impact on ratings in all of our specifications. Disclosure requirements and foreign banks entry have a significant impact on ratings only when we simultaneously control for the regulatory environment and the market structure, while auditing requirements have a significant impact only when we control for the regulatory environment alone. Finally, banks in developed countries are assigned higher ratings. However, this impact disappears when we include the regulatory and supervision variables in the models. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11156-006-0045-0
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Publisher Info
Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 27 (2006)
Issue (Month): 4 (December)
Pages: 403-438
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Handle: RePEc:kap:rqfnac:v:27:y:2006:i:4:p:403-438

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Keywords: Banks; Ratings; Regulations; Supervision;

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fotios Pasiouras, 2008. "International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 187-223, February. [Downloadable!] (restricted)
  2. Boudriga, Abdelakder & Boulila, Neila & Jellouli, Sana, 2009. "Does bank supervision impact nonperforming loans : cross-country determinants using agregate data ?," MPRA Paper 18068, University Library of Munich, Germany. [Downloadable!]
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