Bank stability in South Africa: what matters?

This paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.

This study examines the relationship of auditor tenure and audit quality in four European countries, namely Germany, France, Italy and Spain, with the innovative GMM (Generalized Methods of Moments) model during the period from 2005 to 2013.
Two GMM methods are used with two alternative definitions of crisis – the main and the robustness method. The results agree regardless of the fact that some of the control variables are excluded in the robustness test.
The results support the finding that in Spain, there is an impact of auditors’ long-term tenure on discretionary accruals, affecting auditors’ quality and independence indirectly. In addition, the crisis affected Germany and France as far as the change in negative and positive values of GDP is concerned. In this respect, the crisis affected the above two countries when the years before and after the crisis are considered as a robustness check. The results contain important implications for accountant regulators and policy makers.

This paper sheds light on the financial crisis of 2008–2010 in eleven emerging Eastern European economies (EE11): Armenia, Azerbaijan, Belarus, Bulgaria, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Romania, Tajikistan and Ukraine. The aim is twofold. In the first place it seeks to find out if the financial instability hypothesis, as put forward by Minsky and Kindleberger, is a valid explanatory factor for the crisis. Secondly, it tries to map if general institutional frameworks of these countries were developed in order to stand against the factors leading into the financial crisis.
To answer these research problems the paper maps cycles of three parameters representing the real economy, i.e. gross domestic product, manufacturing output and unemployment and four parameters representing the financial markets, i.e. money supply, credit volumes, inflation and government debt. The cycle approach is carried out with the help of a structural time series analysis to isolate cycles in time series. The paper concludes that there were substantial positive financial cycles previous to the financial crisis mirrored by similar cycles in the real economy.
Similarly, the results show negative cycles in the same parameters during the years of crisis. It seems that an uncontrolled increase in money and credit caused the economy to overheat and thereafter contract into financial and real economy crises.
Also, the paper compiles twelve different indices of institutional development. These are standardized and presented in an institutional development matrix, showing that the general institutional framework for the eleven economies was weak previous to and under the meltdown of the economies.
The construction of an integrated institutional development index on the basis of the same twelve parameters confirms institutional shortcomings, which may have made the economies less able to guard themselves from a crisis initiated by both domestically and internationally financial instability.