Banking stability determinants in Africa

Peterson Ozili

International Journal of Managerial Finance, 2018, vol. 14, issue 4, 462-483

Abstract: Purpose - The purpose of this paper is to investigate the determinants of banking stability in Africa. Design/methodology/approach - The authors present four measures of banking stability embedding banks’ loan loss coverage ratio, insolvency risk, asset quality ratio, and level of financial development, thereby allowing analysis of banking stability determinants from four complementary perspectives: protection for downside credit losses, distress arising from insolvency risk, non-performing loans, and financial development. The authors use the regression methodology to estimate the impact of financial structure, institutional, bank-level factors on bank stability. Findings - The findings indicate that banking efficiency, foreign bank presence, banking concentration, size of banking sector, government effectiveness, political stability, regulatory quality, investor protection, corruption control and unemployment levels are significant determinant of banking stability in Africa and the significance of each determinant depends on the banking stability proxy employed and depends on the period of analysis: pre-crisis, during-crisis or post-crisis. Practical implications - Banking supervisors in African countries should consider the role of financial structure and institutional quality for banking stability in the African region. Originality/value - This study is the first to examine banking stability determinants in Africa that takes into account institutional quality and financial structure.

Keywords: Financial development; Bank profitability; Bank performance; Institutional quality; Banking stability; Financial insititutions (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (22)

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Working Paper: Banking Stability Determinants in Africa (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-01-2018-0007

DOI: 10.1108/IJMF-01-2018-0007

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