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Publication Detailed Description
Banking regulation and banks’ risk-taking behavior: The role of investors’ protection
Journal Title
The Quarterly Review of Economics and Finance
Year (definitive publication)
2023
Language
English
Country
United States of America
More Information
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Abstract
Using panel data from a sample of 535 banks from OECD countries for the 2004–2016 period, this paper examines whether the influence of banking regulation on banks’ risk is channeled through the level of investors’ protection. The banking regulatory factors we consider are activity restrictions, capital stringency and supervisory power. We find that the overall effect of banking regulation on banks’ risk is conditional on the level of investors’ protection and that investors’ protection plays the role of reinforcing each of these individual effects. Investor protection reinforces the positive effect of activity restrictions and capital stringency on banks’ risk and also reinforces the negative effect of supervisory power on this risk. These results are robust to a different estimation method and a different proxy for banks’ risk. Additional robustness tests reveal that some of the banking regulation effects are contingent on the banks’ size and the systemic banking crisis period.
Acknowledgements
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Keywords
Bank risk,Banking regulation,Political institutions
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| UIDB/00315/2020 | Fundação para a Ciência e a Tecnologia |
| UIDB/00685/2020 | Fundação para a Ciência e a Tecnologia |
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