Regulation, Market Structure, Risk and Bank Profitability in the Emerging Countries during the Subprime Crisis

BEN MBAREK Hassene^1, , BEN MBAREK Kais² and KHEMIRI Souad³

¹Head of Finance and Accountability Department at the Higher School of Economic and Commercial Sciences of Tunis and Member of CEDAG Research Unit at Paris 5 Descartes, France

²INSI, informatics institute, university of Manouba, Tunisia

³Responsible of International Cooperation at the University of Tunis and Member of the Interdisciplinary Research on Economies and Business Changes Laboratory (LARIME) at the Higher School of Economic and Commercial Sciences of Tunis

Cite this paper:
BEN MBAREK Hassene, BEN MBAREK Kais and KHEMIRI Souad. Regulation, Market Structure, Risk and Bank Profitability in the Emerging Countries during the Subprime Crisis. Journal of Finance and Economics. 2015; 3(1):15-19. doi: 10.12691/jfe-3-1-3

Abstract

The aim of this paper is to study the effect of the regulatory and institutional environment on banking behavior using a panel of conventional banks in 10 emerging countries over the period 2007-2012. To this end, we adopt a simultaneous equations model to capture the dynamic adjustments of banking behavior and efficiency. The results indicate that there is a negative and significant impact of institutional quality on equity and risk. However, we find a positive and significant impact of the institutional environment on banking efficiency indicating the effectiveness of equity regulation insofar as it helped to increase the strength and stability of the international banking system. The imposition of regulatory requirements reduces credit risk and highlights the importance of market discipline as a crucial element in implementing effective regulation and supervision strategies.

Keywords:
banking behavior efficiency banking regulation regulatory and institutional environment

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