IDEAS home Printed from https://ideas.repec.org/a/eme/jfrcpp/jfrc-12-2017-0107.html
   My bibliography  Save this article

Freedom, competition and bank profitability in Sub-Saharan Africa

Author

Listed:
  • Emmanuel Sarpong-Kumankoma
  • Joshua Abor
  • Anthony Quame Q. Aboagye
  • Mohammed Amidu

Abstract

Purpose - This paper aims to examine the effects of financial freedom and competition on bank profitability. Design/methodology/approach - The study uses system generalized method of moments and data from 139 banks across 11 Sub-Saharan African countries during the period 2006-2012. Findings - The results of the study show that higher market power (less competition) is positively related to bank profitability, but operating efficiency is a more important determinant of profitability than market power. Also, both financial freedom and economic freedom show a positive impact on bank profits. The authors find evidence that banks with higher market power operating in countries with higher freedom for banking activities are more profitable than their counterparts in countries with greater restrictions on banking activities. Practical implications - The results have shown that allowing banks greater freedom to operate would enhance their performance, without necessarily damaging the economy, as operating efficiency appears to be a more important reason for the observed profitability than market power. Originality/value - This study provides insight on the ambiguous relationship between competition and bank profitability by considering the moderating effect of financial freedom which has not been taken into account in previous studies.

Suggested Citation

  • Emmanuel Sarpong-Kumankoma & Joshua Abor & Anthony Quame Q. Aboagye & Mohammed Amidu, 2018. "Freedom, competition and bank profitability in Sub-Saharan Africa," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 26(4), pages 462-481, November.
    • Handle: RePEc:eme:jfrcpp:jfrc-12-2017-0107
    DOI: 10.1108/JFRC-12-2017-0107
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JFRC-12-2017-0107/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JFRC-12-2017-0107/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JFRC-12-2017-0107?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brei, Michael & Jacolin, Luc & Noah, Alphonse, 2020. "Credit risk and bank competition in Sub-Saharan Africa," Emerging Markets Review, Elsevier, vol. 44(C).
    2. Richard Oduro, 2024. "Impact of recapitalisation and dividend payout policies on financial sustainability of rural and community banks in Ghana," Future Business Journal, Springer, vol. 10(1), pages 1-18, December.
    3. Kannyiri Banyen & Nicholas Biekpe, 2020. "Financial integration, competition and bank efficiency: evidence from Africa’s sub-regional markets," Economic Change and Restructuring, Springer, vol. 53(4), pages 495-518, November.
    4. Rexford Abaidoo & Elvis Kwame Agyapong, 2023. "Global food price volatility and inflationary pressures among developing economies," SN Business & Economics, Springer, vol. 3(10), pages 1-21, October.

    More about this item

    Keywords

    Lerner index; Competition; Bank profitability; Market power; Financial freedom; G21; G28; L11;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jfrcpp:jfrc-12-2017-0107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.