The persistence of profits of banks in Africa

Mohammed Amidu () and Simon K. Harvey
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Mohammed Amidu: University of Ghana Business School
Simon K. Harvey: University of Ghana Business School

Review of Quantitative Finance and Accounting, 2016, vol. 47, issue 1, No 4, 83-108

Abstract: Abstract This paper analyses the profit persistence of African banking sector, focusing on the role of the level of competition and banks earnings management. We apply Markov chain to analyse the extent and mobility of profit persistence, dynamic auto regressive model to assess the speed of convergence and the quantile regression technique to examine the determinants of profit persistence of banks in Africa. The results show a high level of profit persistence and relatively low speed of convergence. There is also evidence that regulation and banks earnings management affect both the level and persistence of banks profitability. We also find that competition as well as 2007/2008 financial crisis reduce the level and the speed of profit persistence.

Keywords: Banks; Imperfect market; Bank earnings; Markov chain; Developing countries (search for similar items in EconPapers)
JEL-codes: C33 D42 G21 N27 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-014-0495-8

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