National governance, accounting regulations and systemic stability: International evidence

The importance of understanding global systemic risk was re-emphasised by the financial crisis of 2008 and the subsequent regulatory reforms. This project will provide an important dimension to this policy reform process by considering the manner in which national governance, existing accounting regulations and systemic stability interact in both developed and developing worlds. It is important to model both developed and developing nations as experiences such as the Asian Financial Crisis, the GFC and the Greek crisis indicates that contagious risk can be sourced from a variety of regions. Using the World Bank regulation database and Kaufmann et al. (2010)’s national governance index, our research improves on prior studies by being the first study to consider the role of stronger accounting regulation and quality of regulatory enforcement in acting to (possibly) ameliorate systemic risk. We also investigate how such association differs across banks in different banking market structures.