The Effect o f Commerce-Finance-Banking Linkage Restrictions on Banksassets Quality: The Case of Developing Countries
Tahmasb Mazaheri, Saeid Shirkavnd, Ali Jamali

The purpose of this study is to investigate the effect of banks non-bank financial and commerce activities restrictions on their assets quality in developing countries from 2000 to 2012. The researchsampleincludes the banking systemsof 108developing countries. The dependent variable is the ratio of non-performing loan to total assets of banks (proxy of assets quality), and independent variables include proxies of non-bank financial (banking-financelinkage) and commerceactivities (banking-commercelinkage) restrictions including insurance, capital market, real estate and investment in non-financial firms. The research also control for the effect of some country-specific and industry-specific variables. Due to the endogeneity problem of the variables, dynamic panel data and GMM are used for analyzing data. The results show that tighterrestrictions on the non-bank financial activities (insurance, real estate and real estate) generally havesignificant negative effect on banks assets quality. Securities market activities restrictions also have a significant negative effect on banks assets quality. In contrast, the increases in insurance and real estate activities restrictions havesignificant positive effect on banks assets quality. Increasing the stringency of banks commerce activities restrictions does improve banks assetsquality.

Full Text: PDF     DOI: 10.15640/jibe.v6n2a3