Effects of institutional environment on global banking development
Journal Title: RAN - Revista Academia & Negocios - Year 2018, Vol 4, Issue 2
Abstract
We investigated the effects of institutional environment on banking development. These effects were quantified directly for banking development as well as indirectly for financial stability and diversification activities. We used a dynamic regression model proposed by Arellano & Bond (1991) for a balanced panel of 134 countries between 1994 and 2011. Our results indicate that institutional environment improvements promote banking development. This result is observed for the institutional characteristics of both public and regulatory environments. Diversification has a positive impact on the degree of banking development, showing that banks obtain a credit benefit from economies of scale. Non-linearity observed for diversification effects indicate that positive effects are reversed at high diversification levels. Financial stability has a negative effect, which demonstrates that banking entails financial risk for the sector.
Authors and Affiliations
Jorge Munoz, Sandra Sepulveda Yelpo, Carmen Veloso Ramos
Keywords
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