Impact of capital regulation on financial stability: a North-European study Online publication date: Tue, 18-Oct-2022
by Ahanaf Shahriar; Muhammad Nazmul Hoque; Peter Wanke; Md. Abul Kalam Azad
International Journal of Economics and Accounting (IJEA), Vol. 11, No. 3, 2022
Abstract: Capital regulations by the governments worldwide aim for strengthening financial stability. Yet, financial turmoil is continuing. Despite a substantial number of studies on financial stability worldwide, findings from Northern European countries are limited. This study examines the impact of capital regulation on financial stability of North European countries (Denmark, Finland, Iceland, Norway, Sweden and the UK). Over the sample period of 2010-2020, a panel data regression analysis is done on a substantially balanced panel data employing a collection of six diverse North European nation financial institutions. Regression analysis reveals that the capital ratio, leverage ratio, country governance index and ownership concentration have statistically significant impacts on stability. However, the effect of the bank size, bank profitability and macro-economic factor, i.e., annual GDP growth, offered statistically insignificant impact on stability of financial institutions.
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