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The Impact of the Legal Environment on Bank Profitability: An Empirical Analysis of the Angolan Banking Sector

Author

Listed:
  • João Jungo

    (Research Unit on Governance, Competitiveness and Public Policies (GOVCOPP), Department of Economics, Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal)

  • Cláudio Félix Canguende-Valentim

    (Instituto Superior Politécnico Jean Piaget de Benguela, Benguela P.O. Box 1393, Angola)

Abstract

An efficient legal system facilitates the enforcement of guarantees, enables the recovery of non-performing loans and increases trust between creditors and borrowers. This study examines the effect of the legal environment and the profitability of the Angolan banking sector. Specifically, it analyses the influence of property rights and the rule of law on bank profitability in Angola. The study employs various econometric methods for analyzing panel data, such as Feasible Generalized Least Squares (FGLS), and instrumental variables models such as Two-Stage Least Squares (IV-2SLS), Generalized Method of Moments (IV-GMM) and Quantile Regression (MQREG). The study concludes that improving the legal environment by strengthening property rights and promoting the rule of law favours the profitability of Angolan banks. In terms of practical implications, this study shows that the legal environment in Angola is an important barrier to the promotion of credit in Angola, and, above all, to improving the profitability of banks. This study contributes to the scarce literature highlighting the relationship between the legal system and the Angolan banking sector, a topic that has been little explored in the context of African countries. Furthermore, the study awakens the dormant debate on the legal system and finance.

Suggested Citation

  • João Jungo & Cláudio Félix Canguende-Valentim, 2025. "The Impact of the Legal Environment on Bank Profitability: An Empirical Analysis of the Angolan Banking Sector," JRFM, MDPI, vol. 18(3), pages 1-16, March.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:139-:d:1607144
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    References listed on IDEAS

    as
    1. João Jungo, 2024. "Institutions and economic growth: the role of financial inclusion, public spending on education and the military," Review of Economics and Political Science, Emerald Group Publishing Limited, vol. 9(3), pages 298-315, April.
    2. repec:eme:mfppss:v:35:y:2009:i:2:p:107-127 is not listed on IDEAS
    3. Dieler, Tobias & Zhai, Wei, 2024. "Pledgeability and bank lending technology," Journal of Corporate Finance, Elsevier, vol. 88(C).
    4. Mallika Saha & Kumar Debasis Dutta, 2022. "Does governance quality matter in the nexus of inclusive finance and stability?," China Finance Review International, Emerald Group Publishing Limited, vol. 13(1), pages 121-139, January.
    5. João Jungo & Mara Madaleno & Anabela Botelho, 2022. "Financial Regulation, Financial Inclusion and Competitiveness in the Banking Sector in SADC and SAARC Countries: The Moderating Role of Financial Stability," IJFS, MDPI, vol. 10(1), pages 1-24, March.
    6. repec:eme:mfppss:v:41:y:2015:i:1:p:80-101 is not listed on IDEAS
    7. Mallika Saha & Kumar Debasis Dutta, 2022. "Does governance quality matter in the nexus of inclusive finance and stability?," China Finance Review International, Emerald Group Publishing Limited, vol. 13(1), pages 121-139, January.
    Full references (including those not matched with items on IDEAS)

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