IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Banking on the principles: Compliance with Basel Core Principles and bank soundness

  • Demirgüç-Kunt, AslI
  • Detragiache, Enrica
  • Tressel, Thierry

This study finds that banks receive more favorable Moody's financial strength ratings in countries with better compliance with Basel Core Principles related to information provision. The results are robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, and reverse causality. Compliance with other Core Principles does not affect ratings robustly. Measuring bank soundness through Z-scores yields broadly similar results for advanced and emerging markets. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the core principles.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6WJD-4RJRVNG-1/2/bcd4b08c880b3b51955228b568c59eb5
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Financial Intermediation.

Volume (Year): 17 (2008)
Issue (Month): 4 (October)
Pages: 511-542

as
in new window

Handle: RePEc:eee:jfinin:v:17:y:2008:i:4:p:511-542
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622875

References listed on IDEAS
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.:

as in new window
  1. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
  2. Yongseok Shin & Rachel Glennerster, 2003. "Is Transparency Good for You, and Can the IMF Help?," IMF Working Papers 03/132, International Monetary Fund.
  3. Gelos, Gaston & Wei, Shang-Jin, 2004. "Transparency and International Portfolio Holdings," CEPR Discussion Papers 4476, C.E.P.R. Discussion Papers.
  4. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  5. Perotti, Enrico C & von Thadden, Ernst-Ludwig, 1998. "Dominant Investors and Strategic Transparency," CEPR Discussion Papers 1948, C.E.P.R. Discussion Papers.
  6. David Marston, 2001. "Financial System Standards and Financial Stability; The Case of Basel Core Principles," IMF Working Papers 01/62, International Monetary Fund.
  7. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2002. "Law, Endowment, and Finance," NBER Working Papers 9089, National Bureau of Economic Research, Inc.
  8. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
  9. Udaibir S. Das & Plamen Yossifov & Richard Podpiera & Dmitriy Rozhkov, 2005. "Quality of Financial Policies and Financial System Stress," IMF Working Papers 05/173, International Monetary Fund.
  10. Andrew Feltenstein & Roger Lagunoff, 2003. "International versus Domestic Auditing of Bank Solvency," Working Papers gueconwpa~03-03-08, Georgetown University, Department of Economics.
  11. Anthony J. Richards & David Deddouche, 1999. "Bank Rating Changes and Bank Stock Returns; Puzzling Evidence From the Emerging Markets," IMF Working Papers 99/151, International Monetary Fund.
  12. Richard Podpiera, 2004. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Working Papers 04/204, International Monetary Fund.
  13. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  14. Gropp, Reint & Richards, Anthony J., 2001. "Rating agency actions and the pricing of debt and equity of European banks: What can we infer about private sector monitoring of bank soundness?," Working Paper Series 0076, European Central Bank.
  15. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
  16. Asli Demirgüç-Kunt & Enrica Detragiache, 2005. "Cross-Country Empirical Studies of Systemic Bank Distress: A Survey," IMF Working Papers 05/96, International Monetary Fund.
  17. Mitton, Todd, 2002. "A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis," Journal of Financial Economics, Elsevier, vol. 64(2), pages 215-241, May.
  18. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  19. Billett, Matthew T. & Garfinkel, Jon A. & O'Neal, Edward S., 1998. "The cost of market versus regulatory discipline in banking," Journal of Financial Economics, Elsevier, vol. 48(3), pages 333-358, June.
  20. Richard Podpiera, 2006. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 5.
  21. Sironi, Andrea, 2003. " Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 443-72, June.
  22. Alejandro Micco & Ugo Panizza & Mónica Yañez, 2004. "Bank Ownership and Performance," Research Department Publications 4381, Inter-American Development Bank, Research Department.
  23. Yu, Fan, 2005. "Accounting transparency and the term structure of credit spreads," Journal of Financial Economics, Elsevier, vol. 75(1), pages 53-84, January.
  24. Boyd, John H. & Runkle, David E., 1993. "Size and performance of banking firms : Testing the predictions of theory," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 47-67, February.
  25. Patel, Sandeep A. & Balic, Amra & Bwakira, Liliane, 2002. "Measuring transparency and disclosure at firm-level in emerging markets," Emerging Markets Review, Elsevier, vol. 3(4), pages 325-337, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jfinin:v:17:y:2008:i:4:p:511-542. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.