Financial innovation and bank growth: The role of institutional environments |
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| Institution: | 1. Research Center of the Central China for Economic and Social Development, Nanchang University, China;2. School of Economics and Management, Nanchang University, China;3. Department of Finance, National Central University, Taoyuan, Taiwan;1. Université de Limoges, LAPE, 5 rue Félix Eboué, 87031, Limoges Cedex, France;2. University of Applied Sciences Western Switzerland, HEG, rue de la Tambourine 17, 1227, Carouge, Switzerland;3. Institut Universitaire de France (IUF), 1 rue Descartes, 75231, Paris Cedex 05, France;1. Rotterdam School of Management, The Netherlands;2. ILADES - Alberto Hurtado University, Chile;3. Tilburg University, The Netherlands;1. School of Economics and Management, Dalian University of Technology, Dalian, 116024, China;2. ISILC, Victoria University, Melbourne City, Australia;1. School of Economics and Management, Nanchang University, Nanchang, China;2. Department of Finance, National Central University, Taoyuan, Taiwan |
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| Abstract: | This research evaluates the impact of financial innovation on bank growth and how their growth is affected by various dimensions of institutional environments’ interaction with financial innovation. To address these relationships, we use different measures of financial innovation and bank growth from a panel dataset of 40 countries (OECD and non-OECD) over a sample period spanning from 1989 to 2011. There are three main findings herein. First, banks located in countries with a higher level of financial innovation exhibit better growth in assets, loans, and profits. This positive linkage remains highly significant in the subsample without considering the 2007–2008 global financial crisis. Second, bank regulations, financial reforms, and country governance indicators tend to weaken the relationship between financial innovation and bank growth. Third, globalization leans toward strengthening this relationship. |
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| Keywords: | Financial innovation Bank growth Institutional environments Panel data O32 O5 G21 |
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