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The effects of regulation and supervision on european banking profitability and risk: a panel data investigation

Author

Listed:
  • Faten Ben Bouheni

    (TEM - Télécom Ecole de Management, UEVE - Université d'Évry-Val-d'Essonne)

  • Hachmi Ben Ameur

    (INSEEC - Institut des hautes études économiques et commerciales | School of Business and Economics)

  • Abdoulkarim Idi Cheffou

    (EDC - EDC Paris Business School)

  • Fredj Jawadi

    (UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - EESC-GEM Grenoble Ecole de Management - UEVE - Université d'Évry-Val-d'Essonne - TEM - Télécom Ecole de Management)

Abstract

This paper studies the effects of regulatory and supervisory policies on profitability and risk-taking for European banks over the period 2005 to 2011. As these effects may vary according to the banks, we apply the Generalized Method of Moments (GMM) for dynamic panels to capture further heterogeneous supervision effects before and after the subprime crisis. Accordingly, our findings provide three interesting results. First, strengthening regulations and supervision improves profitability and boosts the stability of European banking systems. Second, our findings highlight a positive correlation between capital adequacy, deposit insurance systems, and banks profitability. Third, we note that stepping up supervisors powers reduces risk-taking and promotes banking stability.

Suggested Citation

  • Faten Ben Bouheni & Hachmi Ben Ameur & Abdoulkarim Idi Cheffou & Fredj Jawadi, 2014. "The effects of regulation and supervision on european banking profitability and risk: a panel data investigation," Post-Print hal-04123845, HAL.
    • Handle: RePEc:hal:journl:hal-04123845
    DOI: 10.19030/jabr.v30i6.8881
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    Cited by:

    1. Marta Penczar & Sabina Nowak & Monika Liszewska, 2023. "Playing by the rules: Do the post‐crisis regulations influence banks' funding model in the EU?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4572-4591, October.

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