Abstract
The study assesses the long-term effects of market risk factors on bank performance in the Sub-Saharan Africa banking system. The article identifies the most influential market risk factor and the most affected bank performance factors in the long term. It covers 40 countries with 350 commercial banks for ten years. The analysis uses dynamic fixed-effects models (ARDL-DFE). The results demonstrated that non-performing loans are the most influencers affecting bank performance factors in the long run. Furthermore, the results show that return on average assets is the most bank performance factor affected mainly by market risks, especially the NPLs in the long run. Finally, the findings surprisingly proved mutual interactions and cointegration movements among bank market risk factors and bank performance measures in the long run. These findings can assist central banks in supervising and regulating SSA commercial banks and inspire regional bank managers in reducing market risks and sharpening long-run performance strategies through resource reallocating.
Highlights
Introduction "Caring bank market risks is caring for bank performance."
The leveraged investment and the credit volume offered to the customers determine the crucial part of bank risks
The main objective was to determine the most influential market risk factor on the one hand and the most affected among bank performance proxies in the long run on the one hand. Based on these results obtained from ARDL-DFE and discussion on results, this study confirmed hypotheses
Summary
Introduction "Caring bank market risks is caring for bank performance."Every business involves risks. Bank operations are engaged in a high degree of risk-taking behavior due to lending activities. Bank operations require certain wisdom and accuracy with a certain degree of intelligent analysis as those operations deal with significant investments. Those substantial investments may not necessarily come from bank ownership. The leveraged investment and the credit volume offered to the customers determine the crucial part of bank risks. These two activities make the intermediation institutions in riskier firms operating in high business risk mainly when analysed from the default rate side (Eichengreen et al, 2012)
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