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Banking Stability Determinants in Africa

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  • Ozili, Peterson K

Abstract

This study investigates the determinants of banking stability in Africa. We present four measures of banking stability embedding banks’ loan loss coverage ratio, insolvency risk, asset quality ratio, and level of financial development, thereby allowing analysis of banking stability determinants from four complementary perspectives: protection for downside credit losses, distress arising from insolvency risk, non-performing loans, and financial development. The findings indicate that banking efficiency, foreign bank presence, banking concentration, size of banking sector, government effectiveness, political stability, regulatory quality, investor protection, corruption control and unemployment levels are significant determinants of banking stability in Africa and the significance of each determinant depends on (i) the banking stability proxy employed (ii) and depends on the period of analysis: pre-crisis, during-crisis or post-crisis. The results highlight the importance of institutional quality for banking stability in Africa. Banking supervisors in African countries should consider the role of financial structure and institutional quality for banking stability in the African region.

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  • Ozili, Peterson K, 2018. "Banking Stability Determinants in Africa," MPRA Paper 101825, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:101825
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    Cited by:

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    2. Kusi, Baah & Agbloyor, Elikplimi & Asongu, Simplice & Abor, Joshua, 2021. "Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter?," MPRA Paper 110136, University Library of Munich, Germany.
    3. Ozili, Peterson K & Outa, Erick R, 2018. "Bank Income Smoothing in South Africa: Role of Ownership, IFRS and Economic fluctuation," MPRA Paper 102567, University Library of Munich, Germany.
    4. Peterson K. Ozili, 2020. "Does competence of central bank governors influence financial stability?," Future Business Journal, Springer, vol. 6(1), pages 1-20, December.
    5. Ozili, Peterson K, 2020. "Does competence of central bank governors influence financial stability?," MPRA Paper 102042, University Library of Munich, Germany.
    6. Yilmaz Bayar & Djula Borozan & Marius Dan Gavriletea, 2021. "Banking sector stability and economic growth in post‐transition European Union countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 949-961, January.
    7. Phuc Nguyen, Canh & Dinh Su, Thanh & Doytch, Nadia, 2020. "The drivers of financial development: Global evidence from internet and mobile usage," Information Economics and Policy, Elsevier, vol. 53(C).
    8. Kamran, Hafiz Waqas & Haseeb, Muhammad & Nguyen, Thu Thuy & Nguyen, V.C., 2020. "Climate change and bank stability: The moderating role of green financing and renewable energy consumption in ASEAN," OSF Preprints v48fa, Center for Open Science.
    9. Kaodui Li & Yusheng Kong & Sampson Agyapong Atuahene & Geoffrey Bentum-Micah & Michael Kwakye Agyapong, 2020. "Corporate Governance and Banking Stability: The Case of Universal Banks in Ghana," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(Special 1), pages 325-352.

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    More about this item

    Keywords

    Financial Structure; Banking stability; Institutional Quality; Financial Institutions; Bank Performance.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • 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

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