Regulation’s influence on EU banking efficiency: an evaluation post crisis

Bace, Edward ORCID: https://orcid.org/0000-0003-4452-0350 and Ferreira, Ana (2020) Regulation’s influence on EU banking efficiency: an evaluation post crisis. Cogent Economics and Finance, 8 (1) , 1838735. pp. 1-21. ISSN 2332-2039 [Article] (doi:10.1080/23322039.2020.1838735)

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Official URL: https://doi.org/10.1080/23322039.2020.1838735

Abstract

This paper examines the impact of regulatory policies on banking market efficiency using a sample of 678 commercial banks from 21 European Union countries for the post-crisis year 2010, controlling for bank-specific and country-specific variables. Data on regulation, supervision and monitoring variables, and activity restrictions are from the most recent Bank Regulation and Supervision Survey database conducted by the World Bank, published 2012. Besides these we incorporate bank size, equity, market share, government ownership, and growth of Gross Domestic Product per capita, employing an Ordinary Least Squares method. Focus is on two alternative measures of banking market efficiency: net interest margin and overhead costs (operating expenses to assets). Elevated levels of these two ratios should indicate a low level of banking efficiency. The evidence suggests that the link between capital regulation and banking efficiency is not robust enough to control for other regulatory variables. Results confirm that activity restrictions have a negative and significant impact on banking efficiency. Policies encouraging official supervisory power do not enhance efficiency of the banking sector. The only approach positively and statistically significantly associated with efficiency is private monitoring. This leads to the suggestion that government regulation and supervision should be more focused on promoting transparency of information.

Item Type:	Article
Research Areas:	A. > Business School A. > Business School > Accounting and Finance A. > Business School > Centre for Enterprise and Economic Development Research (CEEDR) A. > Business School > Economics A. > Business School > International Management and Innovation A. > Business School > International Management and Innovation > Corporate Social Responsibility and Business Ethics group A. > Business School > International Management and Innovation > International Business group A. > Business School > International Management and Innovation > International and Cross-cultural Management group A. > Business School > Leadership, Work and Organisations A. > Business School > Leadership, Work and Organisations > Diversity and Gender group A. > Business School > Leadership, Work and Organisations > Employment Relations group A. > Business School > Leadership, Work and Organisations > Professional Practice group for LWO
Item ID:	31317
Notes on copyright:	© 2020 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.
Useful Links:	http://creativecommons.org/licenses/by/4... Publication Publication Publisher Middlesex University Expert Profile
Depositing User:	Edward Bace
Date Deposited:	02 Nov 2020 08:39
Last Modified:	17 Feb 2021 19:28
URI:	https://eprints.mdx.ac.uk/id/eprint/31317

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