Banking Stability Determinants in Africa

International Journal of Managerial Finance, Vol. 14, 2018

27 Pages Posted: 26 Feb 2018

See all articles by Peterson K Ozili

Peterson K Ozili

University of Essex - Essex Business School; Central Bank of Nigeria

Date Written: February 15, 2018

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.

Keywords: Financial Structure; Banking stability; Institutional Quality, Financial Institutions, Bank Performance

JEL Classification: C02, C19, C52, C61, E32, G21

Suggested Citation

Ozili, Peterson Kitakogelu, Banking Stability Determinants in Africa (February 15, 2018). International Journal of Managerial Finance, Vol. 14, 2018. Available at SSRN: https://ssrn.com/abstract=3124144

Peterson Kitakogelu Ozili (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone
Abuja
Nigeria

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