The impact of bank regulations, concentration, and institutions on bank margins

By Asli Laeven Luc Levine Ross Demirguc. 2003

153 citations recorded by the source corpus.

This paper examines the impact of bank regulations, concentration, inflation, and national institutions on bank net interest margins using data from over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost net interest margins. Inflation also exerts a robust, positive impact on bank margins. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins. So, bank regulations cannot be viewed in isolation. They reflect broad, national approaches to private property and competition.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/a1de0af9023177090eea83c12d3e536eaa3f1227

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Citations in the corpus

Bank Competition and Access to Finance: International Evidence (2004, unknown): “We find a correlation of 47%, significant at the 1% level, between the general financing obstacle and net interest margins, using data from Demirgüç-Kunt, Laeven, and Levine (2003).”
Bank Capital Adequacy Ratio and Bank Performance in Vietnam: A Simultaneous Equations Framework (2020, background): “This result is consistent with the findings by Halkos and Salamouris (2004) and Limam (2002), who concluded that a larger bank can have better chance of survival and improvement under the intensely competitive environment. The finding for a substantially positive relationship between inflation and p”
Denying Foreign Bank Entry: Implications For Bank Interest Margins (2003, background): “First, as argued by Demirguc-Kunt, Laeven, and Levine (2002) , regulatory impediments on banks reflect broad national institutional characteristics.”
Banking supervision and nonperforming loans: a cross-country analysis (2009, unknown): “A growing number of papers use the information contained in this data set to study the impact of bank supervision and regulatory policies on bank performance, stability, and corporate finance (Beck et al., 2003; Demirguc-Kunt et al., 2003).”