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Unveiling the energy saving role of banking performance in Sub-Sahara Africa

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  • Amuakwa-Mensah, Franklin
  • Klege, Rebecca A.
  • Adom, Philip K.
  • Amoah, Anthony
  • Hagan, Edmond

Abstract

This article examines the effect of commercial bank performance on an indicator of energy efficiency (i.e. energy intensity) while controlling for the mediating effect of political institution. To achieve this goal, the study develops a theoretical model based on the neoclassical theory of the firm that links energy efficiency to bank sector development, and a unique bank-based data by Andrianova et al. (2015) for 43 Sub-Saharan African countries from 1998 to 2012. The principal component analysis is used to derive a composite bank-based development index from different bank balance sheet performance indicators- return on asset, asset quality, bank capitalization, managerial inefficiency and financial stability. The two-stage system generalized method of moment (Sys-GMM) technique was used. The results reveal that, both in the short- and long-run, improved banking performance fosters energy efficiency improvements in sub-Saharan Africa, but this is compromised by democracy (institutional quality). Thus, to achieve energy efficiency improvements, specific initiatives should be implemented to boost the development of the banking sector while also ensuring that democratic governance in the sub-region weans itself off things that impede the progress of the real sector. More ambitiously, creating a Green Bank may be necessary to stimulate energy efficiency investments in the sub-region.

Suggested Citation

  • Amuakwa-Mensah, Franklin & Klege, Rebecca A. & Adom, Philip K. & Amoah, Anthony & Hagan, Edmond, 2018. "Unveiling the energy saving role of banking performance in Sub-Sahara Africa," Energy Economics, Elsevier, vol. 74(C), pages 828-842.
  • Handle: RePEc:eee:eneeco:v:74:y:2018:i:c:p:828-842
    DOI: 10.1016/j.eneco.2018.07.031
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    Cited by:

    1. Philip Kofi Adom & Franklin Amuakwa-Mensah & Salome Amuakwa-Mensah, 2020. "Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    2. Nelson Amowine & Zhiqiang Ma & Mingxing Li & Zhixiang Zhou & Benjamin Azembila Asunka & James Amowine, 2019. "Energy Efficiency Improvement Assessment in Africa: An Integrated Dynamic DEA Approach," Energies, MDPI, Open Access Journal, vol. 12(20), pages 1-1, October.
    3. Philip Kofi Adom, 2018. "The Long‐run Effects of Political Regimes and Economic Openness on Energy Intensity," African Development Review, African Development Bank, vol. 30(4), pages 399-409, December.

    More about this item

    Keywords

    Energy intensity; Banking performance; Political institution; System GMM; Sub-Sahara Africa;

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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