Table 5.
Bank performance and stability during the COVID-19 pandemic. The moderating role of institutional quality.
|
Panel A: Bank performance |
Panel B: Bank stability |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Panel (i): Government effectiveness |
|||||||||
| (1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
(9) |
|
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.468 * ** | -1.715 * ** | -0.658 * ** | 1.862 * ** | 0.441 * ** | 0.018 * ** | 0.403 * ** | 1.644 * ** | 0.116 * ** |
| (0.028) | (0.173) | (0.032) | (0.277) | (0.020) | (0.000) | (0.024) | (0.178) | (0.044) | |
| COVID-19 *GEF | 0.174 * ** | -0.224 | 0.240 * ** | -0.219 | -0.075 * ** | 0.026 | -0.178 * ** | -0.968 * ** | 0.025 |
| (0.019) | (0.259) | (0.077) | (0.701) | (0.011) | (0.041) | (0.012) | (0.093) | (0.017) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.451 * ** | -29.531 * ** | 4.023 * ** | 174.363 * ** | -3.084 * ** | 3.499 * ** | 2.186 * ** | 16.058 * ** | 0.951 * ** | |
| (0.467) | (3.088) | (0.371) | (4.311) | (0.289) | (0.199) | (0.167) | (1.602) | (0.190) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.542 | 0.045 | 0.194 | 0.243 | 0.464 | 0.527 | 0.327 | 0.426 | 0.234 |
| Panel (ii): Political stability | |||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.354 * ** | -1.777 * ** | -0.512 * ** | 1.805 * * | 0.380 * ** | 0.061 | 0.269 * ** | 1.024 * ** | 0.109 * ** |
| (0.059) | (0.321) | (0.010) | (0.301) | (0.012) | (0.090) | (0.033) | (0.109) | (0.019) | |
| COVID-19 *PST | 0.152 * ** | 0.638 * | 0.309 * ** | 0.683 * * | -0.130 * ** | -0.007 | -0.250 * ** | -0.753 * ** | 0.001 |
| (0.016) | (0.364) | (0.013) | (0.318) | (0.009) | (0.218) | (0.010) | (0.008) | (0.201) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.026 * ** | -29.244 * ** | 4.449 * ** | 173.859 * ** | -2.918 * ** | 3.593 * ** | 2.583 * ** | 15.958 * ** | 0.875 * ** | |
| (0.431) | (2.671) | (0.265) | (5.011) | (0.210) | (0.198) | (0.299) | (1.969) | (0.189) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.392 | 0.402 | 0.195 | 0.242 | 0.650 | 0.327 | 0.328 | 0.425 | 0.334 |
| Panel (iii): Regulatory quality | |||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.394 * ** | -1.518 * ** | -0.596 * ** | 1.377 | 0.453 * ** | 0.025 | 0.402 * ** | 1.473 * ** | 0.117 * ** |
| (0.051) | (0.391) | (0.036) | (0.995) | (0.021) | (0.051) | (0.037) | (0.187) | (0.012) | |
| COVID-19 *RQL | 0.124 * ** | 0.821 * ** | 0.266 * ** | 0.177 * ** | -0.218 * ** | -0.045 * ** | -0.345 * ** | -1.380 * ** | -0.039 * ** |
| (0.020) | (0.010) | (0.021) | (0.020) | (0.010) | (0.011) | (0.015) | (0.112) | (0.010) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.265 * ** | -28.957 * ** | 4.194 * ** | 171.672 * ** | -3.226 * ** | 3.516 * ** | 1.999 * ** | 16.052 * ** | 0.953 * ** | |
| (0.421) | (2.561) | (0.270) | (5.011) | (0.210) | (0.198) | (0.298) | (1.922) | (0.182) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.352 | 0.343 | 0.195 | 0.292 | 0.267 | 0.327 | 0.231 | 0.227 | 0.334 |
| Panel (iv): Control of corruption | |||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.357 * ** | -1.394 * ** | -0.560 * ** | 1.657 * ** | 0.392 * ** | 0.030 | 0.290 * ** | 1.198 * ** | 0.112 * ** |
| (0.046) | (0.231) | (0.039) | (0.349) | (0.021) | (0.059) | (0.027) | (0.281) | (0.020) | |
| COVID-19 *COC | 0.149 * ** | 0.477 * ** | 0.289 * ** | 0.242 * ** | -0.132 * ** | 0.008 | -0.249 * ** | -0.889 * ** | 0.005 |
| (0.019) | (0.109) | (0.011) | (0.017) | (0.012) | (0.030) | (0.008) | (0.098) | (0.020) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.283 * ** | -29.650 * ** | 4.141 * ** | 173.812 * ** | -3.000 * ** | 3.680 * ** | 2.351 * ** | 16.887 * ** | 0.960 * ** | |
| (0.419) | (3.001) | (0.289) | (4.461) | (0.213) | (0.189) | (0.280) | (1.923) | (0.181) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.192 | 0.283 | 0.396 | 0.272 | 0.466 | 0.128 | 0.230 | 0.326 | 0.364 |
| Panel (v): Rule of law | |||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.382 * ** | -1.486 * ** | -0.608 * ** | 1.588 * | 0.423 * ** | 0.040 | 0.370 * ** | 1.374 * ** | 0.118 * ** |
| (0.045) | (0.229) | (0.039) | (0.350) | (0.020) | (0.060) | (0.022) | (0.271) | (0.019) | |
| COVID-19 *RUL | 0.143 * ** | 0.581 * ** | 0.330 * ** | 0.199 * ** | -0.136 * ** | 0.015 | -0.283 * ** | -0.974 * ** | 0.016 |
| (0.018) | (0.113) | (0.012) | (0.017) | (0.012) | (0.028) | (0.011) | (0.011) | (0.014) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.235 * ** | -29.229 * ** | 4.188 * ** | 173.882 * ** | -2.981 * ** | 3.595 * ** | 2.434 * ** | 17.070 * ** | 0.964 * ** | |
| (0.401) | (2.791) | (0.277) | (4.460) | (0.213) | (0.189) | (0.280) | (1.922) | (0.179) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.252 | 0.223 | 0.197 | 0.142 | 0.276 | 0.372 | 0.291 | 0.286 | 0.434 |
| Panel (vi): Voice and accountability | |||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
| ROAA | ROAE | NIM | CIN | ZSC | NPL | PRK | LRK | ORK | |
| COVID-19 | -0.277 * ** | -1.652 * ** | -0.425 * ** | 1.744 * * | 0.362 * ** | 0.049 | 0.241 * ** | 1.029 * ** | 0.112 * ** |
| (0.039) | (0.227) | (0.037) | (0.341) | (0.021) | (0.059) | (0.024) | (0.201) | (0.017) | |
| COVID-19 *VOA | 0.178 * ** | 0.237 | 0.251 * ** | 0.571 | -0.149 * ** | -0.046 * ** | -0.237 * ** | -0.746 * ** | -0.042 * ** |
| (0.017) | (0.490) | (0.014) | (0.618) | (0.010) | (0.012) | (0.023) | (0.120) | (0.012) | |
| CV | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Control variable | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Bank FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Time FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| -5.239 * ** | -28.564 * ** | 4.165 * ** | 172.827 * ** | -3.142 * ** | 3.516 * ** | 2.162 * ** | 15.811 * ** | 0.872 * ** | |
| (0.399) | (2.989) | (0.271) | (4.430) | (0.200) | (0.189) | (0.279) | (2.011) | (0.151) | |
| Obs. | 24,531 | 24,180 | 24,723 | 24,906 | 22,381 | 12,273 | 23,793 | 23,257 | 23,838 |
| R-squared | 0.212 | 0.312 | 0.195 | 0.242 | 0.267 | 0.328 | 0.229 | 0.426 | 0.350 |
This table reports the country's institutional quality role during the COVID-19 pandemic. The sample consists of 2073 banks in 106 countries from 2016 Q1 to 2021 Q2. Panel A represents the outcomes for bank performance measured as ROA, ROE, NIM, and CIN. Panel B shows the bank stability results, which are measured as ZSC, NPL PRK, LRK, and ORK. COVID-19 is our primary explanatory variable of interest which equals one during the first three quarters of 2020 and 0 otherwise. CV indicates the conditional variables (i.e., institutional strength), which are captured through the Worldwide Governance Indicators (WGI), which contain six different aspects of institutional quality such as government effectiveness (GEF), political stability (PST), regulatory quality (RQL), control of corruption (COC), the rule of law (RUL), voice and accountability (VOA). We also control several bank-specific and country-specific factors, time (quarter) fixed effects, and bank-fixed effects. Robust standard errors are clustered at the country level and reported in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1.