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Central banks' supervisory guidance on corporate governance and bank stability: Evidence from African countries
Jönköping Univ, Jönköping, Sweden.;Univ Rwanda, Kigali, Rwanda..ORCID iD: 0000-0002-2662-2479
Jönköping Univ, Jönköping, Sweden.;DIW, Berlin, Germany.;CERBE, Parma, Italy..
KTH, School of Industrial Engineering and Management (ITM), Centres, Centre of Excellence for Science and Innovation Studies, CESIS. Jönköping Univ, Jönköping, Sweden..ORCID iD: 0000-0001-5776-9396
2020 (English)In: Emerging Markets Review, ISSN 1566-0141, E-ISSN 1873-6173, Vol. 43, article id 100694Article in journal (Refereed) Published
Abstract [en]

This paper focuses on the identification of the causal relationship between central banks' supervisory guidance and individual bank stability. We propose and test the hypothesis that this causal relationship is mediated by the degree to which banks comply with their central bank's corporate governance recommendations. Specifically, we exploit the fact that there is considerable cross-country heterogeneity in providing supervisory guidance. Our recursive two-equation system is equivalent to an endogenous treatment effect model in which the treatment is the provision of supervisory guidance. We find that institutional factors, in particular the legal family of origin, political stability, contract enforcement and strength of investor protection promote provision of supervisory guidance. If a central bank has published supervisory guidance, local banks show better internal governance and higher stability.

Place, publisher, year, edition, pages
Elsevier BV , 2020. Vol. 43, article id 100694
Keywords [en]
African banks, Central bank, Supervisory guidance, Corporate governance, Legal systems, Institutions, Bank stability
National Category
Business Administration
Identifiers
URN: urn:nbn:se:kth:diva-303480DOI: 10.1016/j.ememar.2020.100694ISI: 000536392500012Scopus ID: 2-s2.0-85083045814OAI: oai:DiVA.org:kth-303480DiVA, id: diva2:1603106
Note

QC 20211014

Available from: 2021-10-14 Created: 2021-10-14 Last updated: 2024-03-18Bibliographically approved

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Stephan, Andreas

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