Bank regulation and stock market stability across countries

© 2016, © Emerald Group Publishing Limited. 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

ERM Adoption in the Insurance Sector – Is it a Regulatory Imperative or Business Value Driven?

Purpose - This paper aims to investigate various institutional pressures driving the adoption and implementation of a new risk management system; enterprise risk management (ERM). Design/methodology/approach - The implementation of ERM-related practices is analysed based on an institutional framework and drawing on empirical evidence from multiple sources in 10 large/medium-sized insurance companies. This paper focuses on extraorganisational pressures exerted by political, social and economic institutions on insurance companies, which drove the adoption decision. Findings - It was found that different change agents have taken part in the decision to introduce new risk management system as a part of ERM implementation process. Further, the institutional pressures; coercive, mimetic and normative, were found to differ in character and strength over different intervals of time in relation to the adoption of ERM. Companies that adopted ERM early were mostly driven by internal strategic drivers while the recent adoption decision was more driven by coercive and mimetic pressures. Thus, evidence of divergence between insurance companies was found. Research limitations and implications - The findings have implications for policy makers, regulatory agencies and innovation developers. ERM was considered not only as a necessity but also as a value added to the insurance companies under study. Thus, regulators and innovation developers should survey main players in any specific organisational field to understand their views before issuing new compulsory regulations or developing innovations. They also need to consider exploring companies' experiences with ERM, which can provide a basis for the development of strengthened and more informative regulatory ERM frameworks. This will support a faster and easier understanding and implementation of ERM framework hindered by the confusions companies may face when considering the complicated/changing regulatory and risk requirements. Originality/value - This study extends the scope of institutional analysis to the risk management field, particularly ERM and to the explanation of how different institutions affect the decision to move towards ERM and modify the risk management rules applied within the organisational environment. It looks not only at convergences but also divergences associated with the period of time when ERM adoption decision was made. Thus, it develops a processual view of change