IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v28y2023i4p3824-3832.html
   My bibliography  Save this article

State history, governance and financial institutions' efficiency: Evidence from African countries

Author

Listed:
  • Atanga Ondoa Henri
  • Seabrook Arthur Mveng

Abstract

This study investigates how statehood experience influences financial institutions' efficiency through the quality of governance. To this effect, the study employs a Tobit instrumental variables technique with data from 22 African countries for the period 2002–2018. The state antiquity index, recently provided by Ang and Fredriksson (2018), is used to capture statehood experience whereas rule of law, voice and accountability, regulatory quality, political stability and absence of violence, government effectiveness, and control of corruption are the indicators of the governance quality. Our results show that statehood experience, directly and indirectly, influences financial institutions' efficiency. The nature of the direct effect is negative, while that of the indirect effect depends on the governance indicator considered. Indeed, the negative effect of statehood experience is moderated by the strict application of the rule of law and amplified by control of corruption, political stability and absence of violence, and excessive regulation. Thus, to reduce the negative effect of statehood experience on the efficiency of financial institutions, older African states should: i) promote strict enforcement of the rule of law and alternation of power, and ii) relax regulation and government intervention.

Suggested Citation

  • Atanga Ondoa Henri & Seabrook Arthur Mveng, 2023. "State history, governance and financial institutions' efficiency: Evidence from African countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3824-3832, October.
  • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:4:p:3824-3832
    DOI: 10.1002/ijfe.2621
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.2621
    Download Restriction: no

    File URL: https://libkey.io/10.1002/ijfe.2621?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
    ---><---

    References listed on IDEAS

    as
    1. Lagerlöf, Nils-Petter, 2016. "Statehood, democracy and preindustrial development," Journal of Economic Dynamics and Control, Elsevier, vol. 67(C), pages 58-72.
    2. Nathan Nunn & Diego Puga, 2012. "Ruggedness: The Blessing of Bad Geography in Africa," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 20-36, February.
    3. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    4. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
    5. Ang, James B. & Fredriksson, Per G., 2018. "State history, legal adaptability and financial development," Journal of Banking & Finance, Elsevier, vol. 89(C), pages 169-191.
    6. Daron Acemoglu & Camilo García-Jimeno & James A. Robinson, 2015. "State Capacity and Economic Development: A Network Approach," American Economic Review, American Economic Association, vol. 105(8), pages 2364-2409, August.
    7. Diego Comin & William Easterly & Erick Gong, 2010. "Was the Wealth of Nations Determined in 1000 BC?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 65-97, July.
    8. Oana Borcan & Ola Olsson & Louis Putterman, 2018. "State history and economic development: evidence from six millennia," Journal of Economic Growth, Springer, vol. 23(1), pages 1-40, March.
    9. Ang, James B., 2020. "Early state institutions and the persistence of linguistic diversity," European Journal of Political Economy, Elsevier, vol. 64(C).
    10. Bockstette, Valerie & Chanda, Areendam & Putterman, Louis, 2002. "States and Markets: The Advantage of an Early Start," Journal of Economic Growth, Springer, vol. 7(4), pages 347-369, December.
    11. Constant Fouopi Djiogap & Jacques Simon Song, 2016. "Qualité des institutions, structure de propriété et efficacité des banques dans la CEMAC ," African Development Review, African Development Bank, vol. 28(4), pages 496-508, December.
    12. Louis Putterman, 2008. "Agriculture, Diffusion and Development: Ripple Effects of the Neolithic Revolution," Economica, London School of Economics and Political Science, vol. 75(300), pages 729-748, November.
    13. James B. Ang, 2015. "What Drives the Historical Formation and Persistent Development of Territorial States?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(4), pages 1134-1175, October.
    14. Vu, Trung V., 2021. "Statehood experience and income inequality: A historical perspective," Economic Modelling, Elsevier, vol. 94(C), pages 415-429.
    15. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    16. Laeven, Luc & Majnoni, Giovanni, 2005. "Does judicial efficiency lower the cost of credit?," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1791-1812, July.
    17. Ang, James B., 2013. "Are modern financial systems shaped by state antiquity?," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4038-4058.
    18. Islam, Md. Rabiul & McGillivray, Mark, 2020. "Wealth inequality, governance and economic growth," Economic Modelling, Elsevier, vol. 88(C), pages 1-13.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Atangana Ondoa Henri & Seabrook Arthur Mveng, 2022. "Did state antiquity matter for the size of the informal economy?," Economics of Governance, Springer, vol. 23(2), pages 115-131, June.
    2. Ang, James B. & Fredriksson, Per G., 2018. "State history, legal adaptability and financial development," Journal of Banking & Finance, Elsevier, vol. 89(C), pages 169-191.
    3. Oana Borcan & Ola Olsson & Louis Putterman, 2018. "State history and economic development: evidence from six millennia," Journal of Economic Growth, Springer, vol. 23(1), pages 1-40, March.
    4. Dombi, Ákos & Grigoriadis, Theocharis N. & Zhu, Junbing, 2024. "Antiquity, capitalism & development: The finance-growth perspective," Emerging Markets Review, Elsevier, vol. 59(C).
    5. Vu, Trung V., 2021. "Statehood experience and income inequality: A historical perspective," Economic Modelling, Elsevier, vol. 94(C), pages 415-429.
    6. James B. Ang & Per G. Fredriksson, 2017. "Statehood Experience, Legal Traditions, And Climate Change Policies," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1511-1537, July.
    7. Ang, James B., 2013. "Institutions and the long-run impact of early development," Journal of Development Economics, Elsevier, vol. 105(C), pages 1-18.
    8. Trung V. Vu, 2023. "State history and political instability: The disadvantage of early state development," Kyklos, Wiley Blackwell, vol. 76(3), pages 351-379, August.
    9. Ertan, Arhan & Fiszbein, Martin & Putterman, Louis, 2016. "Who was colonized and when? A cross-country analysis of determinants," European Economic Review, Elsevier, vol. 83(C), pages 165-184.
    10. James B. Ang, 2019. "Culture, Legal Origins, And Financial Development," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1016-1037, April.
    11. Remi Jedwab & Adam Storeygard, 2019. "Economic and Political Factors in Infrastructure Investment: Evidence from Railroads and Roads in Africa 1960–2015," Economic History of Developing Regions, Taylor & Francis Journals, vol. 34(2), pages 156-208, May.
    12. Ang, James B., 2013. "Are modern financial systems shaped by state antiquity?," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4038-4058.
    13. Dombi, Ákos & Grigoriadis, Theocharis, 2020. "State history and the finance-growth nexus: Evidence from transition economies," Economic Systems, Elsevier, vol. 44(1).
    14. James B. Ang, 2015. "What Drives the Historical Formation and Persistent Development of Territorial States?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(4), pages 1134-1175, October.
    15. Borcan, Oana & Olsson, Ola & Putterman, Louis, 2021. "Transition to agriculture and first state presence: A global analysis," Explorations in Economic History, Elsevier, vol. 82(C).
    16. Pavlik, Jamie Bologna & Young, Andrew T., 2019. "Did technology transfer more rapidly East–West than North–South?," European Economic Review, Elsevier, vol. 119(C), pages 216-235.
    17. Nunn, Nathan, 2014. "Historical Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 347-402, Elsevier.
    18. Kodila-Tedika, Oasis & Khalifa, Sherif, 2019. "State History and State Fragility: Evidence from Sub-Saharan Africa," MPRA Paper 97871, University Library of Munich, Germany.
    19. Mark Dincecco & James Fenske & Massimiliano Gaetano Onorato, 2019. "Is Africa Different? Historical Conflict and State Development," Economic History of Developing Regions, Taylor & Francis Journals, vol. 34(2), pages 209-250, May.
    20. Ang, James B. & Fredriksson, Per G., 2021. "Does an early start help or hurt? Statehood, institutions and modern climate change policies," Energy Economics, Elsevier, vol. 94(C).

    More about this item

    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:wly:ijfiec:v:28:y:2023:i:4:p:3824-3832. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    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.