Banking stability is imperative for sustaining economic development within a country. This study examines the impact of corruption and quality of government on bank sector stability, focusing on post-Soviet countries with notable corruption levels and evolving governance structures. Using data from 12 transition countries spanning 2000-2021 and employing GMM estimation, three models are constructed to analyze these relationships. Findings reveal that reduced corruption levels and enhanced government quality are associated with improved banking sector stability. Moreover, positive relationships are observed between banking stability (z-score) and factors such as market power, credit risk, and income diversification, while negative associations exist with inefficiency and regulatory capital. However, indicators related to banking crises and market share show insignificance across models. These findings provide valuable insights for policymakers, regulators, and bank management in identifying vulnerabilities and implementing measures to fortify banking sector resilience and facilitate sustainable economic growth.
KeywordsBanking StabilityCorruptionGovernment QualityTransition Countries
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