The Real Effect and Consequence of Regulation Reform in Corporate Finance and Banking

Abstract

In order for a country to grow economically, it needs a stable, efficient, and well-functioning banking system. The province should examine systematically and comprehensively its regulations, and examine how to improve the quality of these regulations, reduce their administrative burden, and remove the confusion they sometimes create. Several studies have pointed to the importance of financial regulation to the performance and safety of banks. The reform of regulatory policies and practices makes businesses more competitive and decreases regulatory costs, boosting efficiency, bringing down prices, stimulating innovation, as well as making economies more adaptable and competitive. We investigated how banking regulations affected financial development in MENA (Middle East-North Africa) countries. We measured bank regulation by proxies like foreign banks, capital levels, and liquidity liabilities. We measured financial development by proxies like private credit, z-scores, and private credit. Similarly, a tool to measure bank supervision includes supervisory power, independence, private monitoring, and moral hazard in addition to the size, activity, and stability of the financial sector. In terms of financial development, regulation of banks made a positive and significant contribution. A major contribution of the study is to demonstrate that reform supervision is also an important component of bank regulation, so that banks can achieve their regulatory objectives and impact financial development as strongly as possible. For MENA countries, this benefit is particularly significant, since an analysis of the data shows that more emphasis is placed on regulation than supervision in financial sector reform.