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Institutions, regulations, performance and stability of African banks
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
2019 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four independent papers preceded by the introductory chapter linked through the thesis title. The first two papers focus on determinants of bank stability, while the other two focus on the determinants of bank performance.

Paper one assesses the effects of bank compliance with Basel III liquidity and capital requirements on lending and stability. African banks complying with the liquidity threshold above median lend more but are less stable. However, banks above the median capital requirement are more stable but lend less. Compliance depend on central banks’ supervision, regulatory quality, and legal systems.

Paper two investigates how legal systems and institutions influence central banks’ provision of supervisory guidance on corporate governance, and via this channel, affect governance and stability of banks. The publication of supervisory guidance on corporate governance helps banks to improve internal governance and stability, conditional on countries’ legal traditions and institutional quality.

Paper three investigates why legal traditions matter for law development, institutions for creditors and investors, as well as the development of banking systems. The paper provides strong supports for the law and finance theory that legal traditions strongly matter for legal systems development in common law countries but provide partial support for the influence of institutions on bank systems development.

The fourth paper investigates the role of ownership on bank efficiency. A novel approach is applied which addresses the incidental parameter problem associated with Stochastic Frontier Analysis (SFA). Results show both cost and profit efficiency’ superiority of foreign and privately-owned banks.

Abstract [sv]

Avhandlingen består av fyra oberoende artiklar samt en introduktion som binder samman avhandlingen. De två första artiklarna fokuserar på determinanter av bankstabilitet, medan de andra två fokuserar på determinanterna för bankprestanda.

I den första artikeln utvärderas effekterna av bankernas uppfyllelse av Basel III:s likviditets och kapitalkrav på utlåning och stabilitet. Afrikanska banker som ligger på medianen vad gäller likviditet lånar ut mer, men är mindre stabila. Bankerna som ligger över mediankapitalkravet är stabila men lånar ut mindre. Bankernas benägenhet att efterleva kraven beror på centralbankernas tillsyn, regelverkets kvalitet och rättssystemet.

I artikel två undersöks hur rättssystem och institutioner påverkar centralbankernas tillhandahållande av tillsynsriktlinjer för bolagsstyrning, och hur bankernas styrning och stabilitet påverkas av dessa. Offentliggörandet av tillsynsriktlinjer för bolagsstyrning hjälper bankerna att förbättra den interna styrningen och stabiliteten, avhängigt ländernas rättsliga traditioner och institutionella kvalitet.

I artikel tre undersöks varför juridiska traditioner spelar roll för lagarnas utveckling, för institutioner för borgenärer och investerare samt för utvecklingen av banksystemet. Artikeln ger starkt stöd för de teorier inom juridik och finans som säger att juridiska traditioner spelar stor roll för utvecklingen av rättssystemet i länder med sedvanerättsregler, men ger bara delvis stöd för institutionernas inflytande på banksystemets utveckling.

Det fjärde artikeln studeras hur ägarförhållanden påverkar en banks effektivitet. Ett nytt tillvägagångssätt tillämpas som adresserar det tillfälliga parameterproblemet associerat med Stokastisk gränsanalys (SFA). Resultatet visar på överlägsen kostnads- och vinsteffektivitet hos både utländska och privatägda banker.

Place, publisher, year, edition, pages
Jönköping: Jönköping University, Jönköping International Business School , 2019. , p. 41
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 130
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-43218ISBN: 978-91-86345-92-1 (print)OAI: oai:DiVA.org:hj-43218DiVA, id: diva2:1292509
Public defence
2019-03-22, B1014, Jönköping International Business School, Jönköping, 13:00 (English)
Opponent
Supervisors
Available from: 2019-02-28 Created: 2019-02-28 Last updated: 2019-03-04Bibliographically approved
List of papers
1. The impact of liquidity and capital requirements on lending and stability of African banks
Open this publication in new window or tab >>The impact of liquidity and capital requirements on lending and stability of African banks
(English)Manuscript (preprint) (Other academic)
Abstract [en]

We assess whether compliance with Basel III’s main requirements, the Net Stable Funding Ratio (NSFR) and the risk-weighted Total Capital Ratio (TCR), matters for lending and stability of African banks. Banks with an NSFR or a TCR of at least the required minimum are defined as treatment group in the endogenous treatment estimations. Our results reveal that African banks complying with the liquidity threshold NSFR lend more than banks from the less liquid control group. However, complying with the capital threshold improves the Z-score-stability only for those banks with a stability level above the median. The likelihood of African banks to comply with the Basel III thresholds is overall strongly dependent on the strengths of regulatory institutions in the home country and, in case of the capital ratio, also on the legal origin.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-43214 (URN)
Available from: 2019-02-28 Created: 2019-02-28 Last updated: 2019-02-28Bibliographically approved
2. The impact of institutions and supervisory guidance on bank governance and stability: Evidence from African countries
Open this publication in new window or tab >>The impact of institutions and supervisory guidance on bank governance and stability: Evidence from African countries
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper sheds new light on how African countries’ legal systems and institutions influence central banks’ provision of supervisory guidance on corporate governance, and via this channel, affect governance and stability of local banks. Specifically, we exploit the fact that there is considerable cross-country heterogeneity in providing supervisory guidance. Our recursive two-equation system is equivalent to an endogenous treatment effect model in which the treatment is the provision of supervisory guidance. We find that institutional factors, in particular the legal family of origin, political stability, contract enforcement and strength of investor protection promote provision of supervisory guidance. If a central bank has published supervisory guidance local banks show better internal governance and higher stability.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-43215 (URN)
Available from: 2019-02-28 Created: 2019-02-28 Last updated: 2019-02-28Bibliographically approved
3. Legal history, institutions and banking systems development in Africa
Open this publication in new window or tab >>Legal history, institutions and banking systems development in Africa
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper links banking systems development to the historical development of African countries. Specifically, it investigates the impact of differing legal traditions on the development of existing legal systems and institutions, and on African banking systems. Using probit and a recursive equation model estimated with three-stage least squares (3SLS) on a sample of African countries from 2000 to 2016, results show that legal origins strongly matter for the development of legal institutions particularly in countries using common law as their legal tradition. Findings also reveal that strong creditor rights improve banking development in both common and civil law countries. Contract enforcement significantly reduces the cost of banking in African countries.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-43216 (URN)
Available from: 2019-02-28 Created: 2019-02-28 Last updated: 2019-02-28Bibliographically approved
4. Ownership and bank efficiency in Africa: True fixed effects stochastic frontier analysis
Open this publication in new window or tab >>Ownership and bank efficiency in Africa: True fixed effects stochastic frontier analysis
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper investigates the effects of ownership patterns on bank cost and profit efficiencies taking a sample of 607 commercial banks operating in 53 African countries during the period 2005-2015. Using pooled and modified true fixed effects (TFE) stochastic frontier panel approaches, the following results are obtained: First, foreign-owned banks are more profit and cost efficient than their domestic peers. Second, privately-owned banks outperform state-owned banks. These findings result not only from internal efficiencies but also from differences in other bank-level and country-level factors. Specifically, larger and listed banks with many years of operations in host African countries, and favorable macro-economic conditions improve the cost and profit efficiencies of foreign-owned and private-owned banks (foreign and domestic) compared to state-owned domestic banks. Other findings of this study show that ownership concentration (block-holding) has adverse effects for profit and cost efficiencies of banks.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-43217 (URN)
Available from: 2019-02-28 Created: 2019-02-28 Last updated: 2019-02-28Bibliographically approved

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