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The Effects Of Regulation And Supervision On European Banking Profitability And Risk: A Panel Data Investigation

Year: 2014

Type: article

Abstract: This paper studies the effects of regulatory and supervisory policies on profitability and risk-taking for European banks over the period 2005 to 2011. As these effects may vary according to the banks, we apply the Generalized Method of Moments (GMM) for dynamic panels to capture further heterogeneous supervision effects before and after the subprime crisis. Accordingly, our findings provide three interesting results. First, strengthening regulations and supervision improves profitability and boosts the stability of European banking systems. Second, our findings highlight a positive correlation between capital adequacy, deposit insurance systems, and banks profitability. Third, we note that stepping up supervisors powers reduces risk-taking and promotes banking stability.

Source: Journal of Applied Business Research (JABR)

DOI: 10.19030/jabr.v30i6.8881

Authors: Faten Ben Bouheni, Hachmi Ben Ameur, Abdoulkarim Idi Cheffou, Fredj Jawadi

Institutions: INSEEC School of Business and Economics, EDC Paris Business School, Université d'Évry Val-d'Essonne

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

OpenAlex ID: W1575879929

FWCI: 2.441

Cites: 41

Cited by: 23

Related to: 10