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

Niels Hermes*, Aljar Meesters

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

11 Citations (Scopus)
8 Downloads (Pure)

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 87312 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.

Original languageEnglish
Pages (from-to)2154-2172
Number of pages19
JournalApplied Economics
Volume47
Issue number21
DOIs
Publication statusPublished - Oct-2015

Keywords

  • financial liberalization
  • financial regulation
  • banks
  • efficiency
  • stochastic frontier analysis
  • G18
  • G21
  • STOCHASTIC FRONTIER MODELS
  • COMMERCIAL-BANKS
  • ECONOMIC-GROWTH
  • COST EFFICIENCY
  • INSTITUTIONS
  • DEREGULATION
  • PERFORMANCE
  • OWNERSHIP
  • COUNTRIES
  • CRISIS

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