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Derivatives and Banking Lending Activities: Evidence from South Africa’s Banking Sector

Collin Chikwira (), Rishidaw Balkaran () and Veena Parboo Rawjee ()
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Collin Chikwira: Durban University of Technology
Rishidaw Balkaran: Cape Peninsula University of Technology
Veena Parboo Rawjee: Durban University of Technology

The Journal of Accounting and Management, 2021, issue 1(11), 207-219

Abstract: The study explored the impact of derivatives usage and bank credit extension within the South African banking industry from 1996 through to the end of 2017. The system generalised method of moments (GMM) estimation technique with dynamic panel data model was used. The GMM is robust in controlling for endogeneity, unobserved heterogeneity, autocorrelation and dynamic panel bias. The study revealed that derivatives positively influence lending to both the private and public sectors in South Africa. It became evident that South African banks hedge credit risk, interest rate risk and cash flow risk in order to generate more revenue so that they can lend more.

Keywords: Derivatives market; intermediation; hedging; risk management (search for similar items in EconPapers)
Date: 2021
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Handle: RePEc:dug:jaccma:y:2021:i:1:p:207-219