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Does business regulation matter for banks in the European Union?

Does business regulation matter for banks in the European Union?

Kalyvas, Nikolaos Antonios and Mamatzakis, Emmanuel (2014) Does business regulation matter for banks in the European Union? Journal of International Financial Markets, Institutions & Money, 32. pp. 278-324. ISSN 1042-4431 (doi:https://doi.org/10.1016/j.intfin.2014.06.007)

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Abstract

This paper provides a comprehensive analysis of the impact of business and financial specific regulations on banks in the EU-27 over the 2004–2010 period. We employ a dataset of a wide range of business regulation indices from the “Doing Business” project of the World Bank. Results for the credit regulation indices show that the strength of creditor rights is negatively related to bank performance as measured by cost efficiency, although this effect subdues during the recent crisis period (2008–2010). On the other hand, credit information sharing improves efficiency, a result that is further strengthened during the crisis. Tax-compliance costs and entry regulation constrain bank efficiency. More stringent regulation of labour, in terms of minimum wage and dismissal costs, and insolvency regulation are positively associated with efficiency. Furthermore, regulation that protects investors from management expropriation, such as the extent of director liability, exerts a positive impact on bank efficiency and more so in the crisis years. Finally, we use interaction terms between the business regulation variables and institutional quality as measured by the rule of law and control of corruption. Results show that there are cases that institutional quality influences the individual effects of specific types of business regulation on bank efficiency.

Item Type: Article
Uncontrolled Keywords: Regulation of business; Bank efficiency; European Union
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 29 May 2019 08:40
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: GREAT a
Selected for GREAT 2019: GREAT 1
URI: http://gala.gre.ac.uk/id/eprint/14900

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