The Impact of Institutional Quality on Bank Efficiency Moderated by Financial Freedom: Evidence from Emerging Economies
DOI:
https://doi.org/10.63468/Keywords:
Institutional Quality, Banking Efficiency, Financial Freedom, Corruption, Rule of Law, Political StabilityAbstract
The paper aims to study the impact of institutional quality on bank efficiency, with financial freedom as a moderating factor in the emerging economies. The study uses panel data of 49 upper middle-income countries over a period of 2005 to 2020 and employs dynamic system GMM to address the potential endogeneity and persistence in bank efficiency. The findings of the study show that improvements in the institutional quality significantly improve the banking efficiency by reducing the operational costs. It further highlights that the financial freedom plays a significant moderating role in the relationship between institutional quality and the bank efficiency. The study has policy implications for policy makers and suggest that policy reforms to strengthen the governance structure while promoting the financial sector liberalization would improve banking efficiency.
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Copyright (c) 2026 Hassan Mahmood, Dr. Temoor Anjum, Dr. Muhammad Hanif, Dr. Sidra Shahzadi
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