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Macroeconomic Impact of Bank Regulation and Supervision : A cross-country investigation

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  • Bilin Neyapti
  • Nazire Nergiz Dincer

Abstract

Bank regulation and supervision (RS) is a formal institutional mechanism that aims to reduce the adverse selection and moral hazard risks in the banking sector. This paper offers an empirical exploration of the relationship between banking-sector performance and RS using data on the legal quality of bank regulation and supervision. The main channels via which RS affects bank performance are considered to be depositor trust, investment mobilization, and borrower discipline. An event study of up to fifty-three countries provides robust evidence that RS has significant positive effects on bank deposits and investment rate and significant negative effects on nonperforming loans.
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Suggested Citation

  • Bilin Neyapti & Nazire Nergiz Dincer, 2010. "Macroeconomic Impact of Bank Regulation and Supervision : A cross-country investigation," Working Papers 1005, Department of Economics, Bilkent University.
  • Handle: RePEc:bil:wpaper:1005
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    File URL: http://www.bilkent.edu.tr/~economics/papers/10-05_DP_Neyapti_Dincer.pdf
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    Cited by:

    1. Kutan, Ali M. & Muradoğlu, Yaz G., 2016. "Financial and real sector returns, IMF-related news, and the Asian crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 28-37.
    2. Khurshid Djalilov & Jens Hölscher, 2016. "Comparative Analyses Of The Banking Environment In Transition Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(208), pages 7-26, January -.
    3. Bitar, Mohammad & Saad, Wadad & Benlemlih, Mohammed, 2016. "Bank risk and performance in the MENA region: The importance of capital requirements," Economic Systems, Elsevier, vol. 40(3), pages 398-421.
    4. Ali M. Kutan & Yaz Gülnür Muradoğlu & Zhong Yu, 2016. "Worldwide impact of IMF policies during the Asian crisis: who does the IMF help, creditors or crisis countries?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(2), pages 116-147, June.

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