What determines bank productivity? International evidence on the impact of banking competition, bank regulation, and the global financial crisis

Abstract

[[abstract]]This chapter examines the impact of banking competition, bank regulation, and the global financial crisis (GFC) of 2008–2009 on banks’ productivity changes. For the empirical analysis, I apply a semi-parametric two-step approach of Malmquist index estimates and bootstrap regression to a cross-country panel data of 8,451 commercial banks from 82 countries over the period 2004–2012. Empirical results show that (1) banking competition and capital regulation significantly enhance bank productivity, (2) a tighter bank supervision have a positive impact on bank productivity, and (3) bank productivity decreases during the GFC, but starts to increase as the GFC recovers. I also present consistent evidence that commercial banks in countries with better national governance have higher productivity growth before, during and after the GFC