Steering stability: Governance determinants and the banking business insight from southeastern european countries

The research explicitly analyzes the influence of determinants known as good governance and their influence on the banking stability system in Southeastern European countries. To achieve this objective, the research includes determinants such as the rule of law, government effectiveness, regulatory quality, control of corruption, judicial effectiveness, and government integrity as independent variables. The econometric approach applied is the fixed effects regression, covering the period from 2012 to 2023. The research findings indicate that only government effectiveness have a statistically significant positive influence on banking system stability, while rule of law, control of corruption and judicial effectiveness have a statistically significant negative influence. Surprisingly, regulatory quality and government integrity have shown contradictory effects, but with no statistically significant influence. More specifically, the research also addressed long-term relationships through the Pedroni test, which revealed that the included determinants interact in the long term. From the perspective of novelty and originality, the research is considered unique with the determinants included and the countries analyzed, as we have not encountered any scientific article that has addressed these issues for the countries included in the analysis. The research findings are expected to open productive debates among stakeholders to eliminate deficiencies that may negatively affect banking system stability.