Economic freedom, competition and bank stability in Sub-Saharan Africa

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emmanuel Sarpong-Kumankoma ◽  
Joshua Yindenaba Abor ◽  
Anthony Q. Q. Aboagye ◽  
Mohammed Amidu
Keyword(s):  
Economic Freedom ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Bank Stability ◽  
Content Type ◽  
Show Evidence ◽  
Negative Effect ◽  
Sub Saharan ◽  
The Stability

PurposeThis study aims to analyze the potential implications of economic freedom and competition for bank stability.Design/methodology/approachUsing system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.FindingsThe results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.Practical implicationsThe results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.Originality/valueThe study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

Economic freedom and tax revenue performance in sub-Saharan Africa

2018 ◽  
Vol 16 (4) ◽  
pp. 610-638 ◽  
Author(s):  
James Oladapo Alabede
Keyword(s):  
Capita Income ◽  
Economic Freedom ◽  
Sub Saharan Africa ◽  
Tax Revenue ◽  
Traditional Theory ◽  
Per Capita Income ◽  
Content Type ◽  
Tax Effort ◽  
Per Capita ◽  
Sub Saharan

Purpose This study aims to expand the conventional tax effort model to incorporate relevant economic freedom variables to investigate whether economic freedom fosters tax revenue performance in `sub-Saharan Africa (SSA). Design/methodology/approach This study uses data from 42 countries across the four sub-regions of SSA from the period 2005 to 2012 with 252 year-country observations in an unbalanced panel method. The data were statistically treated using feasible generalised least square (FGLS) and panel-corrected standard errors (PCSE) estimate techniques. Findings The findings are twofold. First, the principal finding of the study suggests that economic freedom promotes tax revenue performance. Precisely, the FGLS analysis indicates that property rights freedom, freedom from corruption and investment freedom, as well as the composite economic freedom, exerted positive significant impact on tax revenue performance. This implies that country, which attained high degree of economic freedom, is likely to have higher tax-to-GDP ratio than a country with low level of economic freedom. Secondly, the results of most conventional variables conform to the prediction in the traditional theory except per capita income. Specifically, agriculture share in GDP and per capita income indicate negative significant relationship with tax revenue performance. Originality/value Because little is known empirically about the connection between economic freedom and tax revenue performance, this study extended the conventional tax effort model to incorporate the economic freedom to bridge the knowledge gap due to the absence of empirical evidence on the relationship between economic freedom and tax effort.

Poverty prevalence and negative spillovers in Sub-Saharan Africa: a focus on extreme and multidimensional poverty in the region

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olumide Olaoye ◽  
Cleopatra Oluseye Ibukun ◽  
Mustafa Razzak ◽  
Naftaly Mose
Keyword(s):  
Generalized Method Of Moments ◽  
Spillover Effect ◽  
Multidimensional Poverty ◽  
Sub Saharan Africa ◽  
Cross Sectional ◽  
Spatial Error ◽  
Content Type ◽  
The Sustainable Development ◽  
Sub Saharan ◽  
High Level

PurposeThe paper analyses the prevalence of extreme and multidimensional poverty in line with the sustainable development agenda. In addition, the paper examines the drivers of extreme poverty while accounting for the potential spillover effect of poverty in the region.Design/methodology/approachThe study adopts the pooled OLS with Discroll-Kraay robust standard errors to control for cross-sectional dependence. In addition, given the strong potential for endogeneity of poverty index, the authors also employ the generalized method of moments (GMM), which accounts for simultaneity and endogeneity problems, and the spatial error and lag models to control for all forms of spatial and temporal dependence since the factors that affect poverty disperse across borders.FindingsThe study finds that in addition to the traditional drivers of poverty (unemployment, low per capita GDP growth and public debt), poverty in Sub-Saharan Africa is a symptom of a deeper structural problem (lack of access to water and sanitation, high level of corruption and low level of financial development, and frequent economic busts). Likewise, the results from the spatial econometric specification show, consistently across all the specifications, that there is a substantial spillover effect of poverty across the region.Originality/valueThe main novelty of the paper is that the authors investigate the “economic shrinkage hypothesis,” and examined the potential negative spillover effect of poverty in the region.

scholarly journals Finance, governance and inclusive education in Sub-Saharan Africa

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Simplice A. Asongu ◽  
Nicholas M. Odhiambo
Keyword(s):  
Secondary Education ◽  
Inclusive Education ◽  
Rule Of Law ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Content Type ◽  
Credit Access ◽  
Government Effectiveness ◽  
The Rule Of Law ◽  
Sub Saharan

Purpose The purpose of this paper is to assess the importance of credit access in modulating governance for gender-inclusive education in 42 countries in Sub-Saharan Africa with data spanning the period 2004–2014. Design/methodology/approach The generalized method of moments is used as empirical strategy. Findings The following findings are established: First, credit access modulates government effectiveness and the rule of law to induce positive net effects on inclusive “primary and secondary education.” Second, credit access also moderates political stability and the rule of law for overall net positive effects on inclusive secondary education. Third, credit access complements government effectiveness to engender an overall positive impact on inclusive tertiary education. Originality/value Policy implications are discussed with emphasis on sustainable development goals.

Does economic freedom improve health outcomes in sub-Saharan Africa?

2020 ◽  
Vol 47 (12) ◽  
pp. 1633-1649
Author(s):  
Anand Sharma
Keyword(s):  
Mortality Rate ◽  
Life Expectancy ◽  
Health Outcomes ◽  
Economic Freedom ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Content Type ◽  
The World ◽  
Sub Saharan ◽  
The Impact

PurposeThe purpose of this study is to examine the impact of economic freedom on four key health indicators (namely, life expectancy, infant mortality rate, under-five mortality rate and neonatal mortality rate) by using a panel dataset of 34 sub-Saharan African countries from 2005 to 2016.Design/methodology/approachThe study obtains data from the World Development Indicators (WDI) of the World Bank and the Fraser Institute. It uses fixed effects regression to estimate the effect of economic freedom on health outcomes and attempts to resolve the endogeneity problems by using two-stage least squares regression (2SLS).FindingsThe results indicate a favourable impact of economic freedom on health outcomes. That is, higher levels of economic freedom reduce mortality rates and increase life expectancy in sub-Saharan Africa. All areas of economic freedom, except government size, have a significant and positive effect on health outcomes.Research limitations/implicationsThis study analyses the effect of economic freedom on health at a broad level. Country-specific studies at a disaggregated level may provide additional information about the impact of economic freedom on health outcomes. Also, this study does not control for some important variables such as education, income inequality and foreign aid due to data constraints.Practical implicationsThe findings suggest that sub-Saharan African countries should focus on enhancing the quality of economic institutions to improve their health outcomes. This may include policy reforms that support a robust legal system, protect property rights, promote free trade and stabilise the macroeconomic environment. In addition, policies that raise urbanisation, increase immunisation and lower the incidence of HIV are likely to produce a substantial improvement in health outcomes.Originality/valueExtant economic freedom-health literature does not focus on endogeneity problems. This study uses instrumental variables regression to deal with endogeneity. Also, this is one of the first attempts to empirically investigate the relationship between economic freedom and health in the case of sub-Saharan Africa.

scholarly journals Remittances, ICT and doing business in Sub-Saharan Africa

2019 ◽  
Vol 46 (1) ◽  
pp. 35-54 ◽  
Author(s):  
Simplice Asongu ◽  
Nicholas Biekpe ◽  
Vanessa Tchamyou
Keyword(s):  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Negative Effects ◽  
Content Type ◽  
Doing Business ◽  
Time To Build ◽  
Start Up ◽  
Information And Communication ◽  
Sub Saharan ◽  
Ssa Countries

Purpose The purpose of this paper is to examine how linkages between information and communication technology (ICT) and remittances affect the doing of business. Design/methodology/approach The focus is on a panel of 49 Sub-Saharan African (SSA) countries for the period 2000–2012. The empirical evidence is based on the generalized method of moments. Findings While the authors establish some appealing results in terms of net negative effects on constraints to the doing of business (i.e. time to start a business and time to pay taxes), some positive net effects are also apparent (i.e. number of start-up procedures, time to build a warehouse and time to register a property). The authors also establish ICT penetration thresholds at which the unconditional effect of remittances can be changed from positive to negative, notably: for the number of start-up procedures, an internet level of 9.00 penetration per 100 people is required, while for the time to build a warehouse, a mobile phone penetration level of 32.33 penetration per 100 people is essential. Practical and theoretical implications are discussed. Originality/value To the best of the authors’ knowledge, this is the first study to assess linkages between ICT, remittances and doing business in SSA.

Regulatory capital and stability of Islamic and conventional banks

2017 ◽  
Vol 10 (3) ◽  
pp. 312-330 ◽  
Author(s):  
Fakhri Korbi ◽  
Khemaies Bougatef
Keyword(s):  
Islamic Banks ◽  
Regulatory Capital ◽  
Bank Stability ◽  
Content Type ◽  
Failure Risk ◽  
Negative Effect ◽  
The Difference ◽  
Conventional Banks ◽  
The Stability ◽  
The Relationship

Purpose The purpose of this paper is twofold. First, it attempts to determine the factors that influence the stability of Islamic and conventional banks. Second, it focuses on the relationship between the regulatory capital and bank soundness. Design/methodology/approach Thus, the authors use the Z-score to assess the stability of Islamic and conventional banks operating in the Middle East and North Africa region over the period 1999 to 2014. Findings The comparative analysis reveals that Islamic banks seem to be less stable than their conventional peers. With regard to the determinants of bank stability, the findings suggest that the regulatory capital represents the primordial factor that reinforces the soundness of banking systems. The authors also find that bank stability depends on both bank-specific variables as well as macroeconomic and institutional variables. Interestingly, the corruption level turns out to have a significant negative effect on financial strength in the both types of banks. Originality/value The authors believe that investigating the relationship between regulatory capital and the failure risk in a comparative study between Islamic and conventional banks deserves a particular attention and looks very interesting because it will allow them to identify the difference between the factors explaining the failure risk of each type of banks. The authors also believe that the analysis of the relationship between corruption and bank stability is very interesting because corruption can be seen as an example of moral hazard which forces Islamic banks to use non-PLS instruments.

Stability in the banking industry and commodity price volatility: perspective from developing economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rexford Abaidoo ◽  
Elvis Kwame Agyapong ◽  
Kwame Fosu Boateng
Keyword(s):  
Banking Sector ◽  
Banking Industry ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Price Volatility ◽  
Commodity Price ◽  
Capital Adequacy ◽  
Bank Stability ◽  
Content Type ◽  
Commodity Price Volatility

PurposeThis paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from three main perspectives; bank liquidity reserves, overall bank risk and bank capital adequacy.Design/methodology/approachData were compiled from various sources for 30 emerging economies from 2002 to 2018 and were analyzed using the two-step system generalized method of moments estimation technique.FindingsThe study finds that all things being equal, the magnitude and direction of impact of commodity price volatility on bank stability among economies in Sub-Saharan African (SSA) depend on the type and nature of the commodity in question; and the bank stability proxy used. For instance, an increase in crude oil prices is found to foster stability in the banking industry (proxied by bank liquid reserves) but insignificant when stability in the banking industry is proxied using other banking sector parameters. Additionally, government effectiveness and corruption control have varying moderating influences on how volatility associated with prices of internationally traded commodities influence various proxies for banking industry stability.Originality/valueThis study highlights the effect of fluctuations in prices of key internationally traded commodities (adjusted for foreign exchange impact) that are important sources of revenue among economies in SSA on banking sector stability from liquidity, overall risk and capital adequacy perspectives. The influential role of governance in the relationship between volatility in the price of commodities and bank stability is also revealed by the study.

The role of positioning in the retail banking industry of Sub-Saharan Africa

2017 ◽  
Vol 35 (4) ◽  
pp. 685-713 ◽  
Author(s):  
Charles Blankson ◽  
Seth Ketron ◽  
Joseph Darmoe
Keyword(s):  
Banking Sector ◽  
Participant Observation ◽  
Retail Banking ◽  
Service Industries ◽  
Sub Saharan Africa ◽  
Case Study Method ◽  
Content Type ◽  
Sub Saharan ◽  
Retail Banks

Purpose The purpose of this paper is to investigate employment of positioning strategies in the retail bank sector of Sub-Saharan Africa, specifically using Ghana as the study context. In addition, it explores the applicability of western-based typology of positioning strategies in the Sub-Saharan African environment. Design/methodology/approach Six retail banks – three national and three foreign – are studied, each through an in-depth case study method: covert and participant observation techniques; and face-to-face interviews of chief executive officers, marketing managers, and bank branch managers provided data for the study. Findings The results show that the “service” positioning strategy is the most popular strategy employed by retail banks. “Value for money,” “attractiveness,” “brand name,” and “country of origin” positioning strategies are also dominant. “Top of the range” and “selectivity” strategies are minimally pursued by the sample of banks studied. The results reveal that both foreign and national retail banks employ multiple positioning strategies in the face of competition. However, foreign retail banks consistently employ a; large number of strategies relative to national retail banks. This paper supports the applicability of a western-derived set of positioning strategies in the Sub-Saharan African marketplace. Research limitations/implications This study closes a gap in the understanding of positioning, as well as filling the empirical gap in the application of positioning. In addition, it helps resolve a contextual gap of knowledge in Sub-Saharan Africa’s retail banking sector. Originality/value This study responds to Porter (1996), Clancy and Trout (2002), and Knox (2004) for continued empirical research in positioning in service industries and specifically in Sub-Saharan African economies (Coffie, 2014, 2016; Coffie and Owusu-Frimpong, 2014). Moreover, this research adds value to the banking and marketing literatures through a qualitative case study method, which is an important yet overlooked research method (Yin, 2009).

scholarly journals Growth effect of income inequality in sub-Saharan Africa: exploring the transmission channels

2020 ◽  
Vol 56 (2) ◽  
pp. 176-190
Author(s):  
Ibrahim Abidemi Odusanya ◽  
Anthony Enisan Akinlo
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Growth Effect ◽  
Credit Market Imperfection ◽  
Negative Effect ◽  
Sub Saharan ◽  
Positive Effect ◽  
Ssa Countries

AbstractSub-Saharan Africa (SSA) ranks as the second most unequal region globally (in terms of income distribution), harboring 10 of the 19 most unequal countries in the world. This paper explores the channels through which income inequality exerts its effects on economic growth in SSA. The study spans the period 1995–2015, focusing on 31 SSA countries. Findings from the two-step system generalized method of moments suggest that income inequality exerts a significant positive effect on economic growth via the saving transmission channel, while it has a statistically significant negative effect on economic growth in the region through the channels of fertility, credit market imperfection, and fiscal policy.

scholarly journals Effect of Financial Inclusion on Income Inequality in Sub-Saharan Africa

2020 ◽  
pp. 1-15
Author(s):  
Kipoh Mpele Esther
Keyword(s):  
Income Inequality ◽  
Low Income ◽  
Low Cost ◽  
Panel Study ◽  
Generalized Method Of Moments ◽  
Financial Inclusion ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Negative Effect ◽  
Sub Saharan

Aims: To analyze financial inclusion as a channel to alleviate inequality in order to provide insight into the edifice of inequality reduction. Study Design:  Dynamic panel study. Place and Duration of Study: Sub-Saharan African countries over the period 2004-2018. Methodology: Using the generalized method of moments (GMM) on a sample of 27 Sub-Saharan African countries. Results: The results show that the estimated financial inclusion index has a negative effect on income inequality. Therefore, the depth of commercial bank branches and the effective use of bank accounts reduce income inequality. Conclusion: Increase financial inclusion as well as the development of financial infrastructure and the provision of specific low-cost services tailored to low-income households.

Sign in / Sign up

Export Citation Format

Share Document