Abstract

The topic of financial crises is popular in the financial literature and among regulators. Previous researchers have studied the causes of financial crises and have investigated the regulation responses in the aftermath of the 2008/2009 global crises. However, no one has yet focused on how much existing regulations or country-level governance affect the probability of financial crises occurring. This paper explores this important yet understudied topic. We also compare the differential effects of governance has on different economies, specifically, developed versus developing countries. Our empirical results suggest that the same factor can have opposite effects on different countries.