Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region

Joseph Olorunfemi Akande, Farai Kwenda and Dimu Ehalaiye

Applied Economics, 2018, vol. 50, issue 44, 4774-4787

Abstract: This study investigates the relationship between competition and the risk-taking attitude of banks. We test how this relationship manifests in the Sub-Saharan African(SSA) region’s commercial banks in light of the competition-fragility view, using the generalized methods of moments. We studied 440 commercial banks in 37 SSA countries over the period 2006–2015. The results provide evidence that supports a positive relationship between competition and banks’ overall risk as well as their credit risk but suggests that off-balance sheet risk reduces with competition. We, therefore, conclude that the propensity to undertake higher risk in a competitive banking environment largely accounts for fragility as argued in the competition-fragility view.

Date: 2018
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DOI: 10.1080/00036846.2018.1466995

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