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Financial development and banking industry stability

Author

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  • Rexford Abaidoo
  • Elvis Kwame Agyapong

Abstract

The banking industry plays an important role in the development of economies globally. This study examines the importance of the banking industry to the development of the financial system in Sub-Saharan Africa (SSA) by specifically verifying the effect of four bank stability variables on development of the entire financial system. Data for the study were compiled from 19 countries in the sub-region from 2001 to 2018; and the empirical estimates performed using the Prais-Winston panel corrected standard errors (PW-PCSE) estimation technique. The results suggest that bank liquid reserves and bank Z-score have significant positive effect on financial development. Growth in non-performing loans on the other hand is found to be inimical to the development of the financial sector all things being equal. The results further show that inflation uncertainty has significant positive moderating influence on bank liquid reserves - financial development and non-performing loans - financial development nexuses.

Suggested Citation

  • Rexford Abaidoo & Elvis Kwame Agyapong, 2024. "Financial development and banking industry stability," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 27(3), pages 351-373.
    • Handle: RePEc:ids:ijecbr:v:27:y:2024:i:3:p:351-373
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