Banks In Sub Saharan Africa Research Articles

Moderating Effect of Board Characteristics on the Association between Asset Liability Management and Financial Performance of Commercial Banks in Nigeria

Asset liability management and consistent improvement in financial performance are the responsibility of the Board of Directors of commercial banks, yet studies on the impact of asset liability management on the financial performance of commercial banks in Sub-Saharan Africa have excluded board characteristics variable from their statistical model. This study examines the moderating effect of board characteristics and asset liability management on the financial performance of commercial banks in Nigeria. Commercial banks. It was based on secondary data, obtained from annual reports of commercial banks in Nigeria, the study covered the period starting from 2012 to 2021 and it purposively selected eleven (11) commercial banks out of fourteen (14) commercial banks in Nigeria. The statistical analysis was done using LASSO (Least Absolute Shrinkage Selection Operator). The findings of the study revealed that the moderating effect of board characteristics and asset liability management had a statistically significant impact on the financial performance of commercial banks in Nigeria because the p-values (0.04;0.03,0.02,0.01, and 0.005) obtained using LASSO were less than the 5% statistical threshold used in this study. The study concluded that the board of directors of commercial banks in Nigeria should ensure that they appoint board members who have expertise and experience in the establishment of asset liability management since its interaction with board characteristics showed a statistically significant impact on the financial performance of the bank.

Can We Predict the Financial Distress of Banks in Sub-Saharan Africa?

Can We Predict the Financial Distress of Banks in Sub-Saharan Africa?

Bank capital and liquidity creation in Sub-Saharan Africa: the role of quality institutions

PurposeThis study investigates the relationship between bank capital and liquidity creation and further examines the effect that institutional quality has on this relationship in Sub-Saharan Africa (SSA).Design/methodology/approachThe data comprise 41 universal banks in nine SSA countries from 2010 to 2022. The study employs the two-step system generalized methods of moments and further uses alternative estimators such as the fixed-effect and two-stage least squares methods.FindingsThe empirical results show that bank capital has a direct positive and significant effect on liquidity creation. In addition, the positive effect of bank capital on liquidity creation is enhanced, particularly in a strong institutional environment. The results imply that nonconstraining capital regulatory policies bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.Practical implicationsThis study has several policy implications. First, it provides empirical evidence on the position of banks in SSA on the financial fragility and risk-absorption hypothesis of bank capital and liquidity creation debates. This study shows that the effect of bank capital on liquidity creation in SSA countries is positive and supports the risk-absorption hypothesis. Second, this study highlights that a country's quality institutions can complement bank capital to increase liquidity creation. In addition, this study highlights that nonconstraining capital regulatory policies will bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.Originality/valueThe novelty of this study is that it introduces the country's quality institutional environment into bank capital and liquidity creation links for the first time in SSA.

Board Meeting Effectiveness and Bank Performance: Evidence from Sub-Saharan Africa

The main objective of the study was to evaluate the effectiveness and performance of board meetings at banks in sub-Saharan Africa. The study adopted a quantitative research design and collected secondary data from the annual reports of 33 banks in sub-Saharan Africa to cover the period 2011–2020. To achieve its research objective, the study employed the two-step GMM regression model to examine the relationship between board meeting effectiveness and bank performance. A positive and statistically significant correlation between the effectiveness of board meetings and the financial success of banks was discovered in this research. Our results suggest that improving the efficiency of board meetings can be a viable strategy for boosting bank performance, which has significant ramifications for bank governance in sub-Saharan Africa.

Do board characteristics moderate capital adequacy regulation and bank risk-taking nexus in Sub-Saharan Africa?

PurposeThe purpose of this paper is to examine whether board characteristics moderate the relationship between capital adequacy regulation and bank risk-taking of universal banks in Sub-Saharan Africa (SSA).Design/methodology/approachThe paper uses 700 bank-year observations of universal banks in SSA between 2009 and 2019. The paper further uses the two-step generalized method of moments as the baseline estimator.FindingsThe paper finds that capital adequacy regulation is positively related to overall bank and liquidity risks. Nonetheless, capital adequacy regulation increases credit risk in the sampled banks. The paper further reports that board characteristics individually and significantly moderate the relationship between capital adequacy regulation and risk-taking.Practical implicationsThe findings have implications for regulators of universal banks that board characteristics matter for capital adequacy regulation to impact risk-taking behavior.Originality/valueThe paper extends the existing literature on the effect of board characteristics on the capital adequacy regulations and risk-taking behavior nexus of universal banks.

Enterprise risk management and firm value: Evidence from selected commercial banks in Sub-Saharan Africa

The study investigated the relationship between enterprise risk management and the firm value of quoted banks in Sub-Saharan Africa using an ex-post facto research design. A sample of twenty-seven (27) commercial banks was obtained from three (3) regions of Sub-Saharan Africa (Nigeria, South Africa, and Kenya). The dependent variable is the firm value (Tobin’s Q), while the independent variable is enterprise risk management (measured using enterprise risk management size, independence, and disclosures). Secondary data were obtained from the annual reports and accounts of the sampled banks in Sub-Saharan Africa from 2012-2021. Data obtained were analyzed using descriptive statistics (mean, median, standard deviation, kurtosis, skewness, and Pearson correlation), diagnostic statistics (variance inflation factor, heteroscedasticity, Ramsey regression specification-error test, Cameron and Trivedi’s decomposition of IM-test,) and inferential statistics (principal component analysis, fixed and random effects panel data regression). The fixed and random effects panel data regression results indicated that while enterprise risk management independence (t= 4.63; prob. = 0.000) and enterprise risk management disclosure (t= 2.68; prob. = 0.008) positively and significantly affect firm value, enterprise risk management size (t=-0.04; prob. = 0.967) insignificantly and negatively affects firm value in Sub-Saharan Africa. Among other recommendations, it was suggested that banks need to promote ERM practices as well as ensure risk compliance among banks in Sub-Saharan Africa. Additionally, banks should increase their level of independence of the risk committee while at the same time increasing their level of enterprise risk management practices in the region.

Evaluating the Impact of CAMEL Variables on the Share Price of Banks in Sub-Sahara Africa

Purpose: This study aims to investigate CAMEL variables' effects on deposit money banks' share prices for twelve Nigerian banks, nine Kenyan banks, and five South African banks. Methodology: The panel regression approach was utilised to analyse the study data. The share price was measured by the total of the daily closing share price divided by the number of trading days. Capital adequacy was proxied by the equity-to-total-asset ratio, management efficiency was measured by asset turnover, earnings quality was measured by gross profit margin, and liquidity was measured by the loan-to-deposit ratio. Findings: The findings showed that asset quality positively and significantly influenced the share prices of the South African sample but had an insignificant influence on the share prices of the Nigerian sample. The managerial efficiency significantly and positively influenced the share prices of the South African sample but had an insignificant effect on the share prices of the Kenyan and Nigerian samples. Lastly, findings showed that liquidity negatively and significantly influenced the share prices of our Kenyan and Nigerian samples but had an insignificant influence on the share prices of our South African samples. Originality/Value: The study's findings will help the management of African banks make good management decisions and provide information that will help stakeholders make better investment decisions. The study sheds new insight into the impact of CAMEL variables on the share price of banks in sub-Saharan Africa.

Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.

Funding Structure, Corporate Governance and Earnings Management Among Listed Commercial Banks in Sub-Saharan Africa

Funding Structure, Corporate Governance and Earnings Management Among Listed Commercial Banks in Sub-Saharan Africa

Relationship among corporate reporting, corporate governance, going concern and investor confidence: Evidence from listed banks in sub Saharan Africa

Relationship among corporate reporting, corporate governance, going concern and investor confidence: Evidence from listed banks in sub Saharan Africa

Bank profitability in Sub-Saharan Africa: does economic globalization matter?

PurposeThis study aims to examine the impact of economic globalization on bank profitability in Sub-Saharan Africa.Design/methodology/approachThe empirical analysis is based on panel data of banks spanning 2008–2016. Relying on the KOF Globalization Index, the study uses financial globalization and trade globalization as measures of economic globalization. The authors employ the system generalized method of moments technique to establish the relationship between economic globalization and bank profitability while controlling for the effect of bank-specific and macroeconomic factors.FindingsThe results show a negative significant effect of financial and trade globalization on bank profitability, signifying the intense competition of banks in Sub-Saharan Africa accelerated by globalization. The negative effect of economic globalization holds irrespective of the indicator of bank profitability. Bank size exerts a significant effect on profitability though the impact is negative for return on equity measure. The findings further reveal a positive significant impact of GDP growth and inflation on profitability.Originality/valueThis paper presents a pioneering work on the impact of economic globalization on bank profitability in the Sub-Saharan African context per the researchers' knowledge.

Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

Mobile Banking: An Innovative Solution for Increasing Financial Inclusion in Sub-Saharan African Countries: Evidence from Nigeria

Purpose—This research discusses emerging trends in financial inclusion, barriers and factors influencing mobile banking as an innovative solution for increasing financial inclusion in sub-Saharan Africa (SSA) with a specific focus on Nigeria. Design/methodology/approach—Using a qualitative meta-synthesis (QMS), an interpretivist research paradigm, authors provide an analytical tool for understanding the subject of inquiry by integrating findings from previous studies and relevant data from the reports of the Central Bank of Nigeria on emerging trends in financial inclusion. Findings—Three major factors emerged as drivers of mobile banking in Nigeria: (a) the ease of using mobile devices for personal banking transactions including prompt information about users’ financial transactions (savings and withdrawals) immediately through SMS (short message service) alert (easy management of my account); (b) the security/safety concerns of theft and cyber fraud; (c) social influence of friends, relatives, policy makers and social trends. Implications—In contextualizing mobile banking in SSA and in Nigeria in particular, this paper contributes to exploring the growth in the use of mobile banking by linking it with the “value in use” (VIU) perspective. This approach of the service dominant logic involves three sub-constructs (experience, personalization, and relationship), which all validate and support the proposed assertion that mobile banking is adopted by users because of utility expectancy (perceived usefulness), effort expectancy (perceived ease of use), and social influence expectancy (opinions of friends/relatives). Originality/value—This research, although qualitative in nature, validates information technology (IT) adoption theories/perspectives and enriches the “value in use” approach.

Transfusion Transmitable Infections and Reasons for Release of Total Blood to the Blood Bank of the Yaounde Centrall Hospital

Blood banks in sub-Saharan Africa regularly face shortages of blood products (PS). Several factors are responsible for this, including transfusion-transmissible infections (ITT) and deficiencies in the transfusion system. This study aims to determine the prevalence and the various reasons for rejection at the blood bank of the Central Hospital of Yaoundé. We first conducted a retrospective study at the blood bank of the Central Hospital of Yaoundé for 12 months between January 01, 2014 and December 31, 2014.Secondly, we carried out a prospective study in October 2015. Five milliliters (05 ml) of venous blood were taken from each participant in a tube without anticoagulant; patient samples were stored at -24°C. A rapid screening test and ELISA were used to test for HIV, HCV, HBs and syphilis on the samples taken. Approximately 15,028 bags of whole blood were drawn in 2014, of which 3,688 bags were rejected. This equates to a rejection rate of 24.54%. Discards for non-infectious reasons represented 3.51% and rejections for infectious reasons 21.03%. During the prospective study, among those selected, there were 95.74% men and 4.26% women. The average age of the participants was 30 years. Among the 705 people in this investigation, 185 blood bags were rejected. Infectious causes represented 22.55% (Hepatitis B and C, HIV and syphilis with a respective prevalence of 9.08%, 0.71% 6.95% and 5.82%) and non-infectious causes represented 3.68 % (clots, insufficient volume of PST, hemolysis and expiration with a respective prevalence of: 1.84%, 0.71 0.14% and 0.99%).The association between rejection of blood bags and qualitative variables was assessed. There emerged a significant association between the risk of rejection of a blood bag and the type of donor; condom use, number of partners, history of STIs. At the Yaoundé Central Hospital blood bank, the reasons for rejecting blood bags are divided into two categories: Mainly infectious and non-infectious. Also, certain risk variables such as not using a condom, multiple sexual partners and a history of STIs are risk factors that can encourage rejection of blood bags.

Panel Granger Causality between Bank Competition and Profitability for Multinational Banks in Sub Saharan Africa

There is marked high profitability of banks, and high banking competition in sub Saharan Africa. The nature of the market structure dictates the existing level of competition and profitability. This paper applies a panel granger causality test to investigate the direction of causality between competition and profitability in sub Saharan Africa. Investigation uses the World Bank Data (2007-2017) for the listed best performing multinational banks in 2016 in the region, obtained from the Bankscope for analysis. Bank competition is measured using profit elasticity index (Boone Indicator) while profitability is measured using ROA. Estimation uses a two step ‘system’ generalized method of moments and finds a positive, bi-directional granger causality between competition and profitability. This implies that rapid spread of multinational banking groups in sub Saharan Africa region is motivated by both high level of bank competition and profitability. High competition raises longrun bank profitability but also, high profits motivates entry of rival banks into the industry. Therefore, to scholars, great caution should be taken when defining the dependent and independent variables in studies that concern the relationship between competition and profitability of banks, given this finding of presence of a stead state equilbrium in sub Saharan Africa.

Drivers of Cross-Border Banking in Sub-Saharan Africa

Using data collected from pan-African banks’ (PABs), balance sheets and other sources (Orbis, Fitch), this study identifies some key patterns of cross-border investment in bank subsidiaries by key banking groups in sub-Saharan Africa (SSA) and discusses some of the determinants of this investment. Using a gravity model relating the annual value of a banking group’s investment in the net equity of its subsidiaries to a set of explanatory variables, the analysis finds that cross-border banking is in part driven by a search for yield, diversification, and expansion for strategic reasons.

Does Bank Competition Affect Profitability? The Case of Multinational Banks in Sub Saharan Africa

Globalization and increased openness of modern economies presupposes that multinational enterpreises, banks in particular, freely move to where they expect to reap high profits. Unlike previous studies on bank competition and profitability in sub Saharan Africa, this specific study investigates how multinational bank competion has affected their profitability. Using a two-step system GMM on the sampled best performing multinational banks’ panel dataset (2007-2017) to regress ROA as a measure of bank performance; conventional, and adjusted-Lerner indices for bank competition; alongside six other control variables (geographic diversification, country risk; debt and equity sources of financing, bank size and economy size), results indicate a low market power (Lerner index) due to high level of bank competition. This implies that high profitability is explained by the efficient-structure of multinational banks in the region than market power. Further, the results find country risk, geographic diversication, sources of finance (debt and equity), and size of the economy significantly influencing bank profitability in a positive manner. Only bank size does not significantly affect profitability. The results suggest that competition amongst multinational banks in sub Saharan Africa yields more profits, even in economies where country risk is high due to better efficient structures of the banks. Thus, multinational banks should go ahead and spread to newer economies in the region, as benefits from their efficient structures are still high.

The Critical Mass Question, Women Directors and Performance of Banks in Sub Saharan Africa

This study mainly evaluated the effect of Board composition on the performance of deposit money banks (DMBs) in Sub Saharan Africa (SSA) with special focus on the critical mass question. Specific objectives are determination of the effect of women directors and board composed of more non-executive directors on return on assets (ROA) and net interest margin (NIM) of the banks. Secondary data on six SSA countries and twelve banks collected for the period 2004 to 2016 were used. Panel data regression approach was employed with model selection subjected to Hausman tests. The study revealed among others that board with more nonexecutive directors has significant positive effect on ROA and NIM with significant positive relationship with ROA and NIM. Women directors have very negligible effect on performance of the DMBs while correlating negatively and insignificantly with ROA and NIM. It is therefore, concluded that though, nonexecutive directors have strong positive significant effect on performance of deposit money banks in Sub Saharan Africa and women directors indicate very negligible effect, the conflicts over the effect of the two variables are not yet fully resolved. It is recommended that DMBs should make room for at least three female directors in their boards while adoption and enforcement of gender quota by countries should be considered.

Geographic Diversification to Hedge Risks: How Plausible is it for the Multinational Banks in Sub Saharan Africa?

Risks negatively affect firm performance. Economics theory posits that diversification strategy is one way firms hedge risks. However, the extent diversification can be effective in mitigating risk effects depends on many factors including the form in which hedging is to be shaped. This paper investigates the moderating role of geographic diversification on the effect of country risk on performance of multinational banks in sub Saharan Africa. Sub Saharan Africa is generally characterized by high level of country risk. The investigated question is ‘does geographic diversification by multinational banks in sub Saharan Africa help improve their performance by reducing risk effects? Using a systems generalized method of moments estimation procedure on panel data of the published best performing multinational banks in 2016, and composite country risk indices for the sub Saharan African countries (2007-2017), the study finds that geographic diversification has risk hedging effects that help improve the multinational bank’s performance. This however does not guarantee that banks with high level of geographic diversification are more strongly shielded from country risk effects. At large, for firms whose operations are in multitude countries, geographic diversification helps to significantly shield banks from the country risk effect.

Investigating the Banking Sector Development Transmission Mechanism of Financial Development to Growth: Evidence from Sub-Saharan Africa (SSA)

The search for financial development’s transmission channel to growth has always been updated in the literature. While there has not been a consensus on this matter, empirical findings on finance-growth nexus have been ambiguous. Relying on this, we investigate its bank development transmission channel to growth in a panel of twenty-eight Sub-Saharan Africa (SSA) countries from 2000-2016. Having adopted the augmented Solow (1956) and Mankiw et al. (1992) growth model, the fixed effect and dynamic system GMM estimation techniques reveals a negative non-significant and positive significant direct impact of finance on growth in the static and dynamic models respectively, thereby suggesting institutional (dynamic) factors that can spur finance. Secondly, the non-linear effects of bank development had a direct positive significant impact on growth and its marginal-effects before and after the financial crisis of 2007/08 were relatively stable. This implies that banks in SSA were relatively stable in financial intermediation; therefore SSA countries need to reinforce and improve its banking policy through FinTechs adoption. Finally, the interaction between bank development and financial development significantly increase steady-state growth. This implies that SSA economies can promote steady-state growth from financial development only when a threshold of bank development is reached.