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The Impact of Economic Freedom, Regulation, Corruption and Transparency on Bank Profitability and Bank Stability: Evidence from the Eurozone Area

Asteriou, D., Pilbeam, K. ORCID: 0000-0002-5609-8620 & Tomuleasa, I. (2021). The Impact of Economic Freedom, Regulation, Corruption and Transparency on Bank Profitability and Bank Stability: Evidence from the Eurozone Area. Journal of Economic Behavior and Organization, 184, pp. 150-177. doi: 10.1016/j.jebo.2020.08.023

Abstract

This paper examines the impact of economic freedom, bank regulation, corruption and transparency on bank profitability and bank stability using a sample of 326 banks from the 19 Eurozone countries over the period 2005-2018. We use a balanced panel data set and the Arellano-Bond Generalized Method of Moments dynamic panel estimation procedure. We find that greater economic freedom boosts profitability and banking stability. Our results show that regulation is positively related to bank profitability and its precise effects on stability depend upon the nature of the regulation. We find that corruption and transparency have a negative impact on bank profitability and bank stability. Our overall results indicate that the impact of the variables of interest is sensitive to the precise measures chosen to calculate profitability and financial stability.

Publication Type: Article
Additional Information: © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: financial crisis, dynamic panels, economic freedom, bank regulation, transparency, corruption
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Departments: School of Policy & Global Affairs > Economics
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