Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250051 
Year of Publication: 
2020
Citation: 
[Journal:] Emerging Markets Review [ISSN:] 1566-0141 [Volume:] 43 [Article No.:] 100694 [Publisher:] Elsevier BV [Place:] Amsterdam [Year:] 2020
Publisher: 
Elsevier BV, Amsterdam
Abstract: 
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.
Subjects: 
African banks
Central bank
Supervisory guidance
Corporate governance
Legal systems
Institutions
Bank stability
JEL: 
G21
G28
G30
G32
G38
Published Version’s DOI: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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