IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v47y2015i21p2154-2172.html
   My bibliography  Save this article

Financial liberalization, financial regulation and bank efficiency: a multi-country analysis

Author

Listed:
  • Niels Hermes
  • Aljar Meesters

Abstract

This article investigates the impact of financial reforms on bank efficiency. More specifically, we distinguish between two different types of financial reforms, i.e. financial liberalization measures and measures of the quality of bank regulation and supervision (i.e. financial regulation), and study their relationship to bank efficiency separately. Moreover, we analyse whether the impact of financial liberalization on bank efficiency is conditional on the quality of regulation and supervision of the banking system. We apply stochastic frontier analysis to calculate bank efficiency at the individual bank level and use a new and detailed database that measures different aspects of financial reforms. The data-set consists of 87 312 bank-year observations covering 61 countries for the period 1996-2005. Overall, we show that the impact of financial liberalization policies on bank efficiency is conditional on the extent to which bank regulation and supervision has been adopted and developed.

Suggested Citation

  • Niels Hermes & Aljar Meesters, 2015. "Financial liberalization, financial regulation and bank efficiency: a multi-country analysis," Applied Economics, Taylor & Francis Journals, vol. 47(21), pages 2154-2172, May.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:21:p:2154-2172
    DOI: 10.1080/00036846.2015.1005815
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2015.1005815
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2015.1005815?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:ucp:bkecon:9780226184890 is not listed on IDEAS
    2. R McKinnon, 1991. "Financial Control in the Transition to a Market Economy," CEP Discussion Papers dp0040, Centre for Economic Performance, LSE.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maya El Hourani, 2022. "La capitalisation bancaire et la qualité institutionnelle détermine-t-elle l’efficience coût des banques de la région MENA ?," GREDEG Working Papers 2022-41, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Gaganis, Chrysovalantis & Galariotis, Emilios & Pasiouras, Fotios & Staikouras, Christos, 2020. "Bank profit efficiency and financial consumer protection policies," Journal of Business Research, Elsevier, vol. 118(C), pages 98-116.
    3. Yuan, Xiaohui, 2024. "Disentangling the impact of foreign bank presence on domestic banks performance: Does the degree of foreign ownership in domestic banks matter?," Research in International Business and Finance, Elsevier, vol. 72(PB).
    4. Phan, Hien Thu & Anwar, Sajid & Alexander, W. Robert J. & Phan, Hanh Thi My, 2019. "Competition, efficiency and stability: An empirical study of East Asian commercial banks," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    5. Carmen M. Reinhart & Franziska L. Ohnsorge & Kenneth S. Rogoff & M. Ayhan Kose, 2022. "The Aftermath of Debt Surges," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 637-663, August.
    6. Doumpos, Michalis & Zopounidis, Constantin & Gounopoulos, Dimitrios & Platanakis, Emmanouil & Zhang, Wenke, 2023. "Operational research and artificial intelligence methods in banking," European Journal of Operational Research, Elsevier, vol. 306(1), pages 1-16.
    7. Partovi, Elmira & Matousek, Roman, 2019. "Bank efficiency and non-performing loans: Evidence from Turkey," Research in International Business and Finance, Elsevier, vol. 48(C), pages 287-309.
    8. Shumaila Zeb & Abdul Sattar, 2017. "Financial Regulations, Profit Efficiency, and Financial Soundness: Empirical Evidence from Commercial Banks of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 56(2), pages 85-103.
    9. Huaqing Wu & Jingyu Yang & Wensheng Wu & Ya Chen, 2023. "Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 467-498, June.
    10. Luo, Yun & Tanna, Sailesh & De Vita, Glauco, 2016. "Financial openness, risk and bank efficiency: Cross-country evidence," Journal of Financial Stability, Elsevier, vol. 24(C), pages 132-148.
    11. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    12. Mr. Etibar Jafarov & Mr. Rodolfo Maino & Mr. Marco Pani, 2019. "Financial Repression is Knocking at the Door, Again," IMF Working Papers 2019/211, International Monetary Fund.
    13. Shabbir Ahmad & Abid A. Burki, 2016. "Banking deregulation and allocative efficiency in Pakistan," Applied Economics, Taylor & Francis Journals, vol. 48(13), pages 1182-1196, March.
    14. Tongurai, Jittima & Vithessonthi, Chaiporn, 2023. "Financial openness and financial market development," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    15. Amina Zgarni & Hassouna Fedhila, 2018. "Regulation and Banking Performance in Liberalization Context," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 137-147.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Ramos-Tallada., 2013. "The IMF and management of capital flows: the long road towards a pragmatic approach," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 31, pages 63-85, Autumn.
    2. Steinherr, Alfred & Cisotta, Alessandro & Klar, Erik & Sehovic, Kenan, 2006. "Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia," Working Papers on Regional Economic Integration 6, Asian Development Bank.
    3. Filippov, Mikhail G, 2002. "Russian Voting and the Initial Economic Shock of Hyperinflation," Public Choice, Springer, vol. 111(1-2), pages 73-104, March.
    4. Richard Pomfret, 2003. "Trade and Exchange Rate Policies in Formerly Centrally Planned Economies," The World Economy, Wiley Blackwell, vol. 26(4), pages 585-612, April.
    5. Alexandru Minea & Patrick Villieu, 2006. "Long-Run Monetary and Fiscal Policy Trade-Off in an Endogenous Growth Model with Transaction Costs," Post-Print halshs-00261119, HAL.
    6. Meyendorff, Anna & Snyder, Edward A., 1997. "Transactional Structures of Bank Privatizations in Central Europe and Russia," Journal of Comparative Economics, Elsevier, vol. 25(1), pages 5-30, August.
    7. Schmid, A. Allan, 1992. "Institutional Foundations of the Market Economy with Reference to the Transition Process taking Place in Eastern and Central Europe," Staff Paper Series 201152, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    8. Kaiji Chen & Alfonso Irarrazabal, 2015. "The Role of Allocative Efficiency in a Decade of Recovery," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 523-550, July.
    9. Kalbe Abbas & Manzoor Hussain Malik, 2008. "Impact of Financial Liberalisation and Deregulation on Banking Sector in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(3), pages 287-313.
    10. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    11. Philippe DULBECCO, 2000. "The Dynamics of the Institutional Change and the Market Economy: An Austrian Analysis," Working Papers 200010, CERDI.
    12. Philip Arestis & Howard Stein, 2005. "An Institutional Perspective to Finance and Development as an Alternative to Financial Liberalisation," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(4), pages 381-398.
    13. Conley, John P. & Maloney, William F., 1995. "Optimal sequencing of credible reforms with uncertain outcomes," Journal of Development Economics, Elsevier, vol. 48(1), pages 151-166, October.
    14. Mr. Guillermo Calvo & Mr. Jacob A. Frenkel, 1991. "Obstacles to Transforming Centrally-Planned Economies: The Role of Capital Markets," IMF Working Papers 1991/066, International Monetary Fund.
    15. Sulaiman, Saidu & Masih, Mansur, 2017. "Is liberalizing finance the game in town for Nigeria ?," MPRA Paper 95569, University Library of Munich, Germany.
    16. Hasan, Iftekhar & Marton, Katherin, 2000. "Development and efficiency of the banking sector in a transitional economy: Hungarian experience," BOFIT Discussion Papers 7/2000, Bank of Finland Institute for Emerging Economies (BOFIT).
    17. Fouzia Amin & Sanmugam Annamalah, 2013. "An evaluation of Malaysian capital controls," Journal of Economic Studies, Emerald Group Publishing, vol. 40(4), pages 549-571, August.
    18. Mr. Jacob A. Frenkel & Mr. Guillermo Calvo, 1991. "From Centrally-Planned to Market Economies: The Road from CPE to PCPE," IMF Working Papers 1991/017, International Monetary Fund.
    19. Rabindra Bhandari & Dharmendra Dhakal & Gyan Pradhan & Kamal P. Upadhyaya, 2007. "Determinants of Private Saving in South Asia," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 8(2), pages 205-217, December.
    20. Fleisher, Belton M. & Yin, Yong & Hills, Stephen M., 1997. "The role of housing privatization and labor-market reform in China's dual economy," China Economic Review, Elsevier, vol. 8(1), pages 1-17.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:47:y:2015:i:21:p:2154-2172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.