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On the Performance of Differently Regulated Financial Institutions : Some Empirical Evidence

Author

Listed:
  • Steinherr, Alfred

    (European Investment Bank)

  • Huveneers, Christian

    (Catholic Faculties of Namur (FUNDP), Mons (FUCAM), Lille I, Free University of Brussels (ULB))

Abstract

The paper raises two questions about the industrial economics of banking : first, why are financial market configurations so different across nations ? We discuss the theoretical arguments by following the sequence Regulation-Structure-Performance (section 2). Second, do the differences in regulation and structure matter ? Section 3 provides empirical evidence pertaining to that question. Throughout the paper we refer to two polar cases of financial systems : market (M)-and bank (b)- based systems. As for banks, we distinguish between specialised and universal banks. Universal banking is a particular institutional representation of B-systems. A first empirical test relating macroeconomic growth to financial variables suggests that these variables matter. We then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance. We conclude that universal banks achieve a better risk-return trade-off, due to superior monitoring and information collection capacity.

Suggested Citation

  • Steinherr, Alfred & Huveneers, Christian, 1992. "On the Performance of Differently Regulated Financial Institutions : Some Empirical Evidence," LIDAM Discussion Papers IRES 1992021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1992021
    as

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