Do bank regulation, supervision and monitoring enhance or impede bank efficiency?

James R. BARTH, Chen LIN, Yue MA, Jesús SEADE, Frank M. SONG

Research output: Journal PublicationsJournal Article (refereed)

117 Citations (Scopus)

Abstract

The recent global financial crisis has spurred renewed interest in identifying those reforms in bank regulation that would work best to promote bank development, performance and stability. Building upon three recent world-wide surveys on bank regulation (Barth et al., 2004, 2006, 2008), we contribute to this assessment by examining whether bank regulation, supervision and monitoring enhance or impede bank operating efficiency. Based on an un-balanced panel analysis of 4050 banks observations in 72 countries over the period 1999-2007, we find that tighter restrictions on bank activities are negatively associated with bank efficiency, while greater capital regulation stringency is marginally and positively associated with bank efficiency. We also find that a strengthening of official supervisory power is positively associated with bank efficiency only in countries with independent supervisory authorities. Moreover, independence coupled with a more experienced supervisory authority tends to enhance bank efficiency. Finally, market-based monitoring of banks in terms of more financial transparency is positively associated with bank efficiency.

Original languageEnglish
Pages (from-to)2879-2892
Number of pages14
JournalJournal of Banking and Finance
Volume37
Issue number8
Early online date2 May 2013
DOIs
Publication statusPublished - Aug 2013

Fingerprint

Supervision
Bank efficiency
Monitoring
Bank regulation
Authority
Capital regulation
Financial transparency
Global financial crisis
Panel analysis
Operating efficiency

Bibliographical note

The authors gratefully acknowledge the financial support from Research Grants Council (RGC) of Hong Kong (Nos. 3002-PPR-5 and GRF 448412).

Keywords

  • Bank regulation
  • Operating efficiency
  • Supervision

Cite this

BARTH, James R. ; LIN, Chen ; MA, Yue ; SEADE, Jesús ; SONG, Frank M. / Do bank regulation, supervision and monitoring enhance or impede bank efficiency?. In: Journal of Banking and Finance. 2013 ; Vol. 37, No. 8. pp. 2879-2892.
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Do bank regulation, supervision and monitoring enhance or impede bank efficiency? / BARTH, James R.; LIN, Chen; MA, Yue; SEADE, Jesús; SONG, Frank M.

In: Journal of Banking and Finance, Vol. 37, No. 8, 08.2013, p. 2879-2892.

Research output: Journal PublicationsJournal Article (refereed)

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