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In this paper, the authors investigate whether the systemic local banking crises (LBCs) and global financial crisis (GFC) impact the association between bank profit efficiency and earnings quality in developing economies.

Using panel data spanning 29 years over the period 1991–2019 for 169 banks drawn from five East African countries, the authors perform difference-in-difference multivariate analyses using the generalised method of moments (GMM) system estimator on a sample consisting of 2,261 bank-year observations.

The results, which are robust for endogeneity and other checks, show that banks with higher profit efficiency consistently report higher quality earnings. The authors further establish that whereas systemic LBCs contribute negatively to bank earnings quality, the GFC tends to have a positive impact. These results are upheld when the joint impacts of both systemic LBCs, GFC and profit efficiency on earnings quality are considered. The positive influence of profit efficiency and GFC on earnings quality is pronounced under income-decreasing earnings management. The impacts of profit efficiency, LBCs and GFC on earnings quality appear to be non-monotonic and vary across the sampled countries.

The study's findings are based on banks in five developing countries within a regional economic bloc. Additional studies could focus on other economic blocs for enhanced generalisability of the findings. In addition, some of the variables examined are studied at bank-level, while other variables are at country-level. Finally, the study establishes an association between the variables of interest, and this does not necessarily imply causation.

The results provide useful insights to bank regulatory and supervisory agencies on the need to exercise increased risk-based scrutiny over bank loan loss provisioning and minimum loan loss reserve requirements. From an audit perspective, auditors need to be cautious and apply an enhanced risk-based audit especially when auditing banks during and after a financial, banking or systemic crisis. Credit rating agencies need to pay closer attention to the LLPs of distressed banks. Finally, bank investors and customers should be cautious when using bank financial statements, since bank managers of poorly performing banks might engage in aggressive earnings management.

The study is perhaps the first to examine the joint effects of systemic LBCs on the association between bank profit efficiency and the quality of earnings in a larger dataset of banks in a developing regional economic bloc. The authors also employ the GMM system estimator in the modelling, which helps address some weaknesses in prior studies.

Systemic risk has been one of the most interesting issues in banking and financial literature during the last years, particularly in evaluating its effects on the stability of the whole financial system during crises. Differently from other studies which analyze systemic risk focusing on European countries, we explore the determinant of systemic risk in other regional or continental banking systems, as Latin America. Using the CoVaR approach proposed by Adrian and Brunnermeier (2016), we study the impact of corporate variables on systemic risk on a sample of 30 Latin American banks belonging to seven countries, continuously listed from 2002Q1 to 2015Q4. We investigate the contribution of the corporate variables over different economic periods: the Subprime crisis (2007Q3–2008Q3), the European Great Financial Depression (2008Q4–2010Q2), and the Sovereign debt crisis (2010Q3–2012Q3).

Systemic banking crises can have devastating effects on the economies of developing or industrialized countries. This paper reviews the factors that weaken banking systems and make them more susceptible to crises. It is the first of two papers examining root causes of banking crises and time-consistent policies for resolving them.

This study aims to investigate the influence of systemic banking crises, currency crises and global financial crisis on the relationship between export and economic growth in China by using the annual time series data from the period of 1972 to 2014.

The Johansen and Jeuuselius’ cointegration, auto regressive distributed lag bound testing cointegration, Gregory and Hansen’s cointegration and pooled ordinary least square techniques with error correction model have been used.

Results indicate the positive and significant effect of export of goods and services on economic growth in both long and short run, whereas the negative influence of systemic banking crises and currency crises over economic growth is observed. It is also concluded that the impact of export of goods and service on economic growth becomes insignificant in the presence of systemic banking crises and currency crises. The currency crises effect the influence of export on economic growth to a higher extent compared to systemic banking crises. Surprisingly, the export in the period of global financial crises has a positive and significant influence over economic growth in China, which conclude that the global financial crises did not drastically affect the export-growth nexus.

This paper makes a unique contribution to the literature with reference to China, being a pioneering attempt to investigate the effects of systemic banking crises and currency crises on the relationship of export and economic growth by using long-time series data and applying more rigorous econometric techniques.

The authors provide a comprehensive study on systemic risk of the banking sectors in the ASEAN-6 countries. In particular, they investigate the systemic risk dynamics and determinants of 49 listed banks in the region over the 2000–2018 period.

The authors employ the market-based SRISK measure of Brownlees and Engle (2017) to investigate the systemic risk of the ASEAN-6's banking sectors.

The authors find that the regional systemic risk fluctuates significantly and currently at par or higher level than that of the recent global financial crisis. Systemic risk is generally associated with banks that have bigger size, more traditional business models, lower quality in their loan portfolios, less profitable and with lower market-to-book values. However, these relationships vary significantly between ASEAN countries.

The research focuses on the systemic risk of ASEAN-6 countries. Therefore, the research results may lack generalizability to other countries.

The authors’ empirical evidence advocates the use of capital surcharges on the systemically important financial institutions. Although the region has been pushing to higher financial integration in recent years, the authors encourage the regional regulators to account for the idiosyncratic characteristics of their banking sectors in designing effective macroprudential policy to contain systemic risk.

This paper provides the first study on the systemic risk of the ASEAN-6 region. The empirical evidence on the drivers of systemic risk would be of interest to the regional regulators.

The paper models the financial interconnectedness and systemic risk of shadow banks using Granger-causal network-based measures and takes the Indian shadow bank crisis of 2018–2019 as a systemic event.

The paper employs pairwise linear Granger-causality tests adjusted for heteroskedasticity and return autocorrelation on a rolling window of weekly returns data of 52 financial institutions from 2016 to 2019 to construct network-based measures and calculate network centrality. The Granger-causal network-based measure ranking of financial institutions in the pre-crisis period (explanatory variable) is rank-regressed with the ranking of financial institutions based on maximum percentage loss suffered by them during the crises period (dependent variable).

The empirical result demonstrated that the shadow bank complex network during the crisis is denser, more interconnected and more correlated than the tranquil period. The closeness, eigenvector, and PageRank centrality established the systemic risk transmitter and receiver roles of institutions. The financial institutions that are more central and hold prestigious positions due to their incoming links suffered maximum loss. The shadow bank network also showed small-world phenomena similar to social networks. Granger-causal network-based measures have out-of-sample predictive properties and can predict the systemic risk of financial institutions.

The study considers only the publicly listed financial institutions. Also, the proposed measures are susceptible to the size of the rolling window, frequency of return and significance level of Granger-causality tests.

Supervisors and financial regulators can use the proposed measures to monitor the development of systemic risk and swiftly identify and isolate contagious financial institutions in the event of a crisis. Also, it is helpful to policymakers and researchers of an emerging economy where bilateral exposures' data between financial institutions are often not present in the public domain, plus there is a gap or delay in financial reporting.

The paper is one of the first to study systemic risk of shadow banks using a financial network comprising of commercial banks and mutual funds. It is also the first one to study systemic risk of Indian shadow banks.

This paper aims to suggest ways to complete the enhancement of the policy responses to systemic banking crises that followed the Great Financial Crisis.

An integrated macrofinancial analytical framework was designed to overcome the segregation between macro work, based on national accounting concepts, and prudential oversight of financial institutions, based on business accounting and concepts.

The design and implementation of the integrated macrofinancial framework are within reach, supported by extensive ongoing research work around the world, and correspond to rising expectations by the international community. It will lead to improvements in the way systemic banking crises are managed. Even more importantly, it offers a promising avenue to make further progress in the prevention of future crises.

The main limitations are the need to overcome the well-known constraints of national accounting, and to overcome the enduring silo separating macro-economists from financial sector experts. The implications are the need for extensive additional interaction between these two groups of experts.

The practical, operational implications are extensive, and could yield a major impact on the global financial stability work agenda. The design of policy responses to systemic banking crises could be profoundly affected, in particular with regard to the target of these responses (corporates vs banks in particular).

The direct and indirect costs of systemic banking crises could be reduced, with widespread benefits for society at large.

This is a fully original new proposed approach with extensive operational value for practitioners.

The purpose of this paper is to answer one important question: in the aftermath of a systemic banking crisis, can the expected deviations in credit supply, liquidity, and other bank characteristics become entrenched in that they do not converge back to “normal”?

Using a panel data set of commercial banks in the Mercosur during the period 1990-2006, the authors analyze the impact of crises on four sets of financial indicators of bank behavior and outcomes – profitability, maturity preference, credit supply, and risk taking. The authors employ convergence methodology – which is often used in the growth literature – to identify the evolution of bank behavior in the region after crises.

A key finding of the paper is that bank risk-taking behavior is significantly modified leading to prolonged reduction of intermediation to the private sector in favor of less risky government securities and preference for high levels excess liquidity well after the crisis. This can be attributed to the role played by macroeconomic and institutional volatility that has nurtured a relatively high level of risk aversion in banks in the Mercosur.

To the best of the authors’ knowledge, using convergence methodology is a relatively novel approach in this area. An added advantage of using this approach over others currently used in the literature is that the authors can empirically quantify the rate of convergence and the institutional and macroeconomic factors that condition the convergence. Moreover, the methodology allows one to identify – in some hierarchical order – factors that condition persistent deviation from “normality.” The lessons learned from the Mercosur case study are useful for countries that suffered systemic banking crises in the aftermath of the global financial crisis.

Previous academic literature indicates that the case of the banking crises recovery, in view of implemented regulations and policies, differs across times and countries. This is explained by varied institutional environments in which banking sectors operate, and in which financial crises persist. Therefore, the aim of this study is to prioritize investigation of the regulatory framework in the crisis‐response policies across European countries affected by the current financial turmoil. In order to elicit most accurate results and fill in the gap in existing literature on banking crises, the paper aims to focus on both qualitative and quantitative methodological frameworks in order to ensure that the concerns raised by practitioners are addressed and implications for the regulatory processes instrumented.

The emphasis of the current study has been laid to flag the region‐ and country‐specific vulnerabilities in regulatory framework employed for banking crisis recovery. Additional focus has been put on groups of systemic risk which evolved from the current financial crisis and ways these risks can be ameliorated. Furthermore, the current paper strives to explore the ideas of ways to ameliorate negative outcomes of the global crisis and mitigate common risks with reference to the flawed regulations. Especially, important issues have been raised by the interviewed experts who put forward their opinions on the ways of lifting the regulatory shortcomings and costs of remedies identified in the study and who provided solutions to ensuring the financial stability of European capital markets.

The study highlighted areas of regulations that require immediate attention and which failed to prevent financial markets from the current banking crisis. These findings are then summarized with constructive proposals on how to amend banking sector and financial regulations. The study also provides a cross‐European comparison of the financial crisis‐recovery policies, evaluating solutions adopted in various selected European countries. Henceforth, the empirical model tested the possibility of a tradeoff existing between remedies which involve substantial public funds and exert burden on both fiscal balances and taxpayers, and the speed and effectiveness of the recovery processes. To this point, no tradeoff has been found. Moreover, contrasting the current banking crisis to the past financial market disturbances, highlighted the magnitude of the nascent economic downturn prevailing in Europe.

Since the existing body of literature abounds in studies devoted to investigations of the causes for the current banking crisis, the research focus of this paper has been shifted away from the factors and flawed regulations that trigger banking crises. To this point, the paper has traits of pioneering work.