Do Bank Regulation, Supervision and Monitoring Enhance or Impede Bank Efficiency?

50 Pages Posted: 28 Mar 2010  

James R. Barth

Auburn University; Milken Institute

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

(马跃) Yue Ma

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Jesús Seade

Zhongshan University - Department of Economics

Frank M. Song

The University of Hong Kong - School of Economics and Finance

Date Written: March 21, 2010

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, and 2008), we attempt to contribute to this assessment by examining whether bank regulation, supervision and monitoring enhance or impede bank operating efficiency. Based on an unbalanced panel analysis of more than 4,050 banks observations in 72 countries over the time 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. In addition, we 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.

Suggested Citation

Barth, James R. and Lin, Chen and Ma, (马跃) Yue and Seade, Jesús and Song, Frank M., Do Bank Regulation, Supervision and Monitoring Enhance or Impede Bank Efficiency? (March 21, 2010). Available at SSRN: https://ssrn.com/abstract=1579352 or http://dx.doi.org/10.2139/ssrn.1579352

James R. Barth (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Yue Ma

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/yuema24

Jesús Seade

Zhongshan University - Department of Economics ( email )

Hong Kong
China

Frank M. Song

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Paper statistics

Downloads
706
Rank
27,968
Abstract Views
2,557