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Do legal and institutional environments matter for banking system performance?

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  • José Arias
  • Carlos Maquieira
  • Mauricio Jara

Abstract

Using data on 52 countries’ banking systems from 2005 to 2014, we explore how the legal and institutional environment influences banking system performance. Using panel data and controlling for financial and economic development indicators, we find evidence of several relationships related to banking system performance. First, a higher degree of legal protection for both lenders and borrowers positively affects banking system performance. Second, there is a positive relationship between the degree of law enforcement and banking system performance. Third, better regulatory quality positively affects banking system performance. Fourth, neither the degree of information sharing nor the control of corruption has a significant effect on banking sector performance. Finally, we find no significant differences in banking sector performance by type of economy.

Suggested Citation

  • José Arias & Carlos Maquieira & Mauricio Jara, 2020. "Do legal and institutional environments matter for banking system performance?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 2203-2228, January.
    • Handle: RePEc:taf:reroxx:v:33:y:2020:i:1:p:2203-2228
    DOI: 10.1080/1331677X.2019.1666023
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    Cited by:

    1. Miguel Resende & Carla Carvalho & Cecília Carmo, 2024. "Impacts of the Transition to the Expected Loss Model on the Portuguese Banking Sector," JRFM, MDPI, vol. 17(4), pages 1-14, April.
    2. Mengting Fan & Zan Mo & Huijian Fu & Tsung-Hsien Wu & Zili Chen & Yue He, 2024. "Does climate policy uncertainty matter for bank value?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-28, April.

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