Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter?

Baah Kusi, Elikplimi Agbloyor, Simplice Asongu and Joshua Abor
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Baah Kusi: University of Ghana Business School, Ghana
Joshua Abor: University of Ghana Business School, Ghana

No 21/022, Research Africa Network Working Papers from Research Africa Network (RAN)

Abstract: This study examines the effect of foreign bank assets and presence on banking stability in the economies with strong and weak country-level corporate governance in Africa between 2006 and 2015. Employing a Prais-Winsten panel data model on 86 banks in about 30 African economies, the findings on how foreign bank assets and presence influence banking stability in strong and weak corporate governance economies under different regulatory regimes are reported for the first time in Africa. The initial findings show that foreign bank presence and assets promote banking stability. However, the positive effect of foreign bank assets and presence is enhanced in economies with strong country-level corporate governance, while the positive effect of foreign bank assets and presence is weakened in economies with weak country-level corporate governance. After introducing different regulatory variables (regimes), it is observed that the enhancing effect of foreign bank presence and assets on banking stability in the full sample and economies with strong and weak country level corporate governance systems is deepened or improved under loan loss provision regulation regime. However, under the private and public sector-led financial transparency regulations, the reducing effect of foreign bank presence and assets on banking stability in economies with weak corporate governance systems is further dampened. These findings show that the relationship between foreign bank presence and assets is deeply shaped by corporate governance systems and regulatory regimes in Africa. Hence, policymakers must build strong corporate governance and sound regulatory regimes to enhance how foreign bank operations promote banking stability.

Keywords: Stability; Foreign banks; Regulation, Corporate governance; Africa (search for similar items in EconPapers)
JEL-codes: G0 G2 G3 (search for similar items in EconPapers)
Pages: 37
Date: 2021-01
New Economics Papers: this item is included in nep-afr, nep-ban and nep-fdg
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Forthcoming: Journal of Financial Economic Policy

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http://publications.resanet.org/RePEc/abh/abh-wpap ... bility-in-Africa.pdf Revised version, 2021 (application/pdf)

Related works:
Working Paper: Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter? (2021)
Working Paper: Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter? (2021)
Working Paper: Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter? (2021)
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