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Do formal and informal institutions shape the influence of sustainable banking on financial development?

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  • Úbeda, Fernando
  • Javier Forcadell, Francisco
  • Suárez, Nuria

Abstract

This paper explores the moderating role of formal and informal institutions on the sustainable banking and financial development link. We compute an aggregated measure of sustainability in the banking sector for a sample of 46 countries for the period 2010-2018. Our results indicate that sustainable banking positively influences financial development only in countries with strong formal institutions. Nevertheless, informal institutions can generate the necessary trust in the banking sector, allowing the positive effect of sustainable banking on financial development in countries with weak formal institutions. The results are robust after controlling the potential endogeneity issues.

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  • Úbeda, Fernando & Javier Forcadell, Francisco & Suárez, Nuria, 2022. "Do formal and informal institutions shape the influence of sustainable banking on financial development?," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321003913
    DOI: 10.1016/j.frl.2021.102391
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    More about this item

    Keywords

    Sustainable banking; Financial development; Formal and informal institutions; Trust; Culture; Reputation;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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