Nexus of governance, macroeconomic conditions, and financial stability of banks: a comparison of developed and emerging countries

Financial Innovation

Table 8 Results of external factors affecting financial stability (emerging countries sample)

Variables	(1)	(2)
	Two-step Sys-GMM	D–K S.E. Fixed Effect
	FSI	FSI
Financial Stability Index (t − 1)	0.807***
Financial Stability Index (t − 1)	(0.014)
Inflation	− 0.024***	− 0.027**
Inflation	(0.001)	(0.011)
Interest Rate	0.012**	0.007*
Interest Rate	(0.003)	(0.010)
Money Supply	− 0.027***	− 0.027**
Money Supply	(0.003)	(0.011)
GDP growth	0.048***	0.043***
GDP growth	(0.003)	(0.016)
Voice and Accountability	0.007**	0.007**
Voice and Accountability	(0.002)	(0.007)
PA&AV	0.006**	0.005*
PA&AV	(0.002)	(0.007)
Government Effectiveness	0.022***	0.024**
Government Effectiveness	(0.004)	(0.016)
Regulatory Quality	− 0.010**	− 0.014*
Regulatory Quality	(0.005)	(0.013)
Rule of Law	− 0.042**	− 0.039**
Rule of Law	(0.006)	(0.019)
Control of Corruption	0.015***	0.014**
Control of Corruption	(0.003)	(0.014)
Constant	0.060**	0.066***
Constant	(0.007)	(0.016)
Time Effect (i.year)	YES	YES
Observations	616	616
R-squared		0.765
AR1	− 3.383
AR1 p-value	0.000718
AR2	− 0.673
AR 2 p-value	0.501
Sargan Test	426.7
Hansen Test	78.39
Hansen(p-value) Test	0.181
No. of Instruments J-Statistics	33
Wald test-CHI2	21,547
Wald test-CHI p-value	0
Number of countries	88

Robust Standard errors in parentheses, ***p < 0.01, **p < 0.05, *p < 0.1 indicate significance at 1%, 5%, and 10% levels, respectively, Used Stata outreg2, xtabond2 command— (Roodman 2009)