Effects of Financial Openness and Institutions on Banking Stability in Asian Countries

Abstract

This paper examines the impacts of financial openness and institutions on banking stability in Asian countries from 2011 to 2020. Through the feasible generalized least squares method (FGLS), research results show that financial openness measured according to Chinn & ctg (2008) has a strong positive impact on banking stability (ZSCORE). Besides, institutional indicators such as control of corruption, government efficiency, rule of law, voice and accountability increase the banking stability in selected Asian countries. Therefore, the paper suggests some policy implications to improve banking stability in these countries.