Commonality, macroeconomic factors and banking profitability

Joaqui-Barandica, Orlando; Manotas-Duque, Diego Fernando; Uribe, Jorge M.

doi:10.1016/j.najef.2022.101714

Cited by 8 publications

(9 citation statements)

References 36 publications

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“…Agro-production is the main driver of ED across the continent, while DC and FDI have an impact on both, but specially they influence significantly ED (Gollin, 2020;Suri & Udry, 2022). Moreover, FD, FDI, and ED naturally affect bank risk proxies -via NPLs and LLRs (F. Abbas et al, 2021;Ding & Sickles, 2019), and bank returns -via ROA and ROE (Joaqui-Barandica et al, 2022). An illustration of this hypothesized interaction effects is shown in Figures 6 and 7.…”

Section: Agriculture Production and Agriculture Financementioning

confidence: 92%

“…Abbas et al, 2021; Ding & Sickles, 2019). Likewise, bank profit is represented by—ROA and ROE (Joaqui-Barandica et al, 2022). Hence, their functional relationship can be formulated as follows:…”

Section: Methodsmentioning

confidence: 99%

“…On one side, FD influences both ED and agro-production (Ngong, Thaddeus et al, 2022). On the other side, ED has an impact on bank risk and credit in general (F. Abbas et al, 2021;Ding & Sickles, 2019;Joaqui-Barandica et al, 2022), as well as on bank credit to agricultural production, in particular (Ngong, Onyejiaku et al, 2022;Yadav & Rao, 2022). Thus, how far the effects of its interactions with agro-production and finance development (DC and FDI) can affect bank risk and profit, keeping in mind that agro-production is a major contributor to African ED (Suri & Udry, 2022) and while DC and FDI determine bank risk and profit?…”

Section: Introductionmentioning

confidence: 99%

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The Effects of the Interactions Between Agro-Production, Economic, and Financial Development on Bank Sustainability

Zheng

Jean-Petit

2023

SAGE Open

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The Sub-Saharan African region encounters a deficiency in agricultural financing, which can be attributed to its constraints in accessing international investments in general and the low engagement of bank risk-taking in particular. This situation leads to underproduction, which exacerbates poverty and malnutrition in the region. Thus, this study investigates the impact of the interaction effects between agricultural production, economic development (ED), and financial development (FD via FDI and DC) on bank stability ratios across 40 countries, encompassing 350 operational banks, during the period covering 2010 to 2019. The research employs the Generalized Method of Moments (GMM) technique and verifies its consistency with Two-Stage Least Squares (2SLS) and the Z-Score Approach. The results highlight two findings: first, the interaction effects between economic development, agricultural production, and financial development factors have significantly greater impacts on bank sustainability than their individual effects without interactions. Secondly, these interaction effects sustain significantly bank stability in two ways: on the one hand, they increase bank returns (through both ROE and ROA), while on the other hand, they reduce bank riskiness (via negative effects on NPL and positive effects on LLR). The study concludes that those interaction effects significantly sustain the stability of the African banking system. The SS African states (via their central banks) should promote farming finance services and enforce a minimum ratio of farming loans for each commercial bank’s credit portfolio as a solution to the investment deficiency in the sector. Hence, this can solve food production level issues, ensure food security, and effectively sustain both the banking system and real economic development.

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Section: Agriculture Production and Agriculture Financementioning

confidence: 92%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Effects of the Interactions Between Agro-Production, Economic, and Financial Development on Bank Sustainability

Zheng

Jean-Petit

2023

SAGE Open

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“…Bank performance has been studied so far by different researchers using different bank-specific variables. Still, two traditional types of returns are the most popular to assess bank profit: return on equity and return on assets (Joaqui-Barandica et al, 2022). To ensure the effect of agricultural production proxies on bank profitability, two models were parametrized using ROE and ROA as dependent variables:…”

Section: General Methods Of Moment (Two-step System Gmm)mentioning

confidence: 99%

The impact of African agriculture production on bank stability through bank risk and profit

Jean-Petit¹,

Zheng²

2022

IJRBS

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The African farming sector suffers from insufficient finance. Climate changes and socio-political issues hold down the required production level while food on the continent is still inadequate, with more vulnerable people on the one side. On the other side, credit institutions need reasons and guarantees to raise their risk-taking level (financial benefits). Then, this study tries to conciliate those two sides with new shreds of evidence by demonstrating the short and long-run effects of agricultural production on bank sustainability in 40 Sub-Saharan African countries. The study used different agro-production factors (Food and Cereal production factors), bank stability proxies (Liquidity Ratio, NPLs, LLRs), and bank profitability proxies (ROA and ROE). The GMM, DFE, and FMOLS models were used for short (with the 2010-2019 dataset) and long-run analysis (with the 1970-2018 dataset). The results demonstrated that agricultural production increases bank stability and profitability but reduces bank risks. The study concludes that farming finance increases agro-production and stabilizes banks (win-win). Governments, via central banks, should encourage commercial banks to increase bank risk-taking levels to sustain their banking system, increase farming production, and improve food security.

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“…Joaqui- Barandica et al (2021) examined the relationship between commonality, macroeconomic factors and bank profitability, while the study by Chand et al (2021) analysed the determinant of bank stability in a small Island economy, providing evidence from Fiji.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Bank Size and Financial Performance in Sub-Saharan Africa

Yahaya¹,

Shagari²,

Mohammed

2022

Malaysian Management Journal

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Bank size is one of the vital internal determinants of banking performance, although scholars hold contradictory views on bank size and its influence on performance. The aim is to examine the effect of bank size on quoted deposit money banks (DMBs) in the region of sub-Saharan Africa (SSA). The sample, collected over a period of nine years (2011-2019) included fifty listed commercial banks drawn from across the six sub-Saharan African countries, namely Nigeria, Ghana, South Africa, Zambia, Kenya, and Tanzania. The data were analyzed using a two-step system generalized method of moment (GMM). The finding revealed a significant and negative association between bank size and its financial performance. However, the smaller banks performed better when compared to their larger counterparts in the region. These findings seem to suggest that banks keep their capital level on the high side and minimize the rate of their non-performing loans in order to achieve more excellent banking performance within the region.

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Commonality, macroeconomic factors and banking profitability

Cited by 8 publications

References 36 publications

The Effects of the Interactions Between Agro-Production, Economic, and Financial Development on Bank Sustainability

The Effects of the Interactions Between Agro-Production, Economic, and Financial Development on Bank Sustainability

The impact of African agriculture production on bank stability through bank risk and profit

Bank Size and Financial Performance in Sub-Saharan Africa

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