Banking regulation, central bank governor credentials and earnings quality of banks in East Africa

Purpose This study aims to examine the association between banking regulation, credentials of central bank governors and quality of bank earnings. Design/methodology/approach Using panel data spanning 29 years, from 1991 to 2019, the authors model bank earnings quality as a function of scores for banking regulation and the individual credentials of central bank governors for 170 banks in the East African region. Findings The results reveal that a stricter regulatory regime is associated with higher bank earnings quality. However, the findings do not show a consistent and significant association between central bank governor credentials and bank earnings quality. Practical implications Overall, the results support the need for consistent and stricter regulatory supervision and monitoring of banks within the East African region. Originality/value To the best of the authors’ knowledge, this study is perhaps the first in a developing country context to examine how both bank regulation and the individual credentials of central bank governors influence the quality of earnings in banks.