Bank regulation and stock market stability across countries

Walaa Wahid ElKelish, Jon Tucker

Research output: Contribution to journalArticle

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Abstract

Purpose: The purpose of this paper is to investigate whether bank capital strength and external auditing requirements influenced international stock market stability during the 2007/2008 global financial crisis. Design/methodology/approach: Bank mandatory regulation data are obtained from the World Bank database, while stock market stability is gauged for 385 listed banks across 43 countries by means of generalised least squares regression models. Findings: The authors find that mandatory capital strength requirements and the existence of mandatory audit increase stock market stability across countries. Further, more profitable banks increase stock market stability. The results are robust to both country institutional settings and economic freedom characteristics. Originality/value: This paper provides evidence of the impact of bank regulations on stock market stability during the global financial crisis, thereby providing a useful insight for stakeholders to enhance financial regulation and policy.

Original languageEnglish
Pages (from-to)402-419
Number of pages18
JournalJournal of Financial Regulation and Compliance
Volume24
Issue number4
DOIs
Publication statusPublished - 1 Jan 2016
Externally publishedYes

Bibliographical note

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Keywords

  • Bank regulation
  • Capital strength
  • Financial crisis
  • Mandatory audit
  • Market stability

ASJC Scopus subject areas

  • Strategy and Management

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