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Revisiting the effect of regulation, supervision and risk on banking performance

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  • Houssem Rachdi
  • Faten Ben Bouheni

Abstract

Purpose - – This paper aims to present an analysis of how regulatory and supervisory policies affect risk-performance nexus. Design/methodology/approach - – Empirically, on a sample of 60 large European banks over the period 2005-2011, the authors explore this relationship by using the panel smooth transition regression (PSTR) modeling because the nexus between risk and performance is nonlinear and it depends on specific national factors especially regulatory and supervisory policies. Findings - – The major finding of this study is that the effect of risk on banking performance is conditional by the improvement of banking governance in Europe. Practical implications - – The PSTR helps to account for a change of regime in the effects of risk on performance. Originality/value - – This paper explains the use of PSTR modeling.

Suggested Citation

  • Houssem Rachdi & Faten Ben Bouheni, 2016. "Revisiting the effect of regulation, supervision and risk on banking performance," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 24(1), pages 24-40, February.
    • Handle: RePEc:eme:jfrcpp:v:24:y:2016:i:1:p:24-40
    DOI: 10.1108/JFRC-07-2014-0034
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    Cited by:

    1. Daniel Ofori-Sasu & John Kuwornu & Gloria Clarissa Dzeha & Baah Aye Kusi, 2022. "Risk behaviour and insurance efficiency: the role of ownership and regulations from an emerging economies," SN Business & Economics, Springer, vol. 2(7), pages 1-30, July.
    2. Hichem Saidi & Houssem Rachdi & Nidhal Mgadmi, 2017. "Revisiting the Role of Governance and Institutions in the Impact of Financial Liberalization on Economic Growth using the PSTR Model," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(3), pages 315-336, June.

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