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Systemic Banking Crises, Financial Liberalization and Governance

Author

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  • Basma Majerbi

    (University of Victoria, Canada)

  • Houssem Rachdi

    (University of Jendouba, Tunisia)

Abstract

This paper revisits the relationship between liberalization and systemic banking crisis in light of a more comprehensive measure of financial liberalization and its interaction with various measures of banking governance and institutional quality. We estimate the probability of systemic banking crisis for a sample of 53 countries using multivariate logit models and allowing the determinants of crisis to vary across country groups. The results show that liberalization increases the likelihood of crisis only at early stages of financial reforms and up to certain level, after which, greater liberalization, through more advanced financial reforms, tends to reduce the probability of systemic banking crisis. We also find that stricter banking regulation and supervision, better law and order, government stability, lack of corruption and bureaucratic efficiency generally lead to reduced probability of crisis. However, the magnitude and significance of the beneficial effects of governance largely depend on the degree of liberalization and vary across countries depending on their levels of income and development.

Suggested Citation

  • Basma Majerbi & Houssem Rachdi, 2014. "Systemic Banking Crises, Financial Liberalization and Governance," Multinational Finance Journal, Multinational Finance Journal, vol. 18(3-4), pages 281-336, September.
    • Handle: RePEc:mfj:journl:v:18:y:2014:i:3-4:p:281-336
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    References listed on IDEAS

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    Cited by:

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    2. Polyzos, Stathis & Samitas, Aristeidis & Kampouris, Ilias, 2021. "Economic stimulus through bank regulation: Government responses to the COVID-19 crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    3. Tanna, Sailesh & Luo, Yun & De Vita, Glauco, 2017. "What is the net effect of financial liberalization on bank productivity? A decomposition analysis of bank total factor productivity growth," Journal of Financial Stability, Elsevier, vol. 30(C), pages 67-78.
    4. Izabela Jędrzejowska-Schiffauer & Peter Schiffauer & Eleftherios Thalassinos, 2019. "EU Regulatory Measures Following the Crises: What Impact on Corporate Governance of Financial Institutions?," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 432-456.

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    More about this item

    Keywords

    systemic banking crises; early warning systems; multivariate logistic regressions; financial liberalization; institutional quality and banking governance;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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