The Determinants of Commercial Bank Profitability in Sub-Saharan Africa

Flamini, Valentina; McDonald, Calvin; Zabczyk, Pawel

doi:10.2139/ssrn.1356442

Cited by 83 publications

(69 citation statements)

References 21 publications

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“…Given that the optimal output, 𝑄𝑇 𝑌 𝑖 , of banks 𝑖, 𝑖 = 1,• • • , 𝑁 at time 𝑡, is at the point where marginal cost, 𝑀𝐶 𝑖 , equals its marginal revenue, 𝑀𝑅 𝑖 , the ratio of the difference between the price, 𝑃 𝑖 , and the marginal cost, 𝑀𝐶 𝑖 , on price is the Lerner index denoted as 𝐿𝐼 𝑖 and expressed algebraically as shown in equation ( 1) (Flamini, Schumacher & McDonald, 2009).…”

Section: Competitionmentioning

confidence: 99%

Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region

2018

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This study investigates the relationship between competition and the risk-taking attitude of banks. We test how this relationship manifests in the Sub-Saharan African(SSA) region's commercial banks in light of the competition-fragility view, using the generalised methods of moments. We studied 440 commercial banks in 37 SSA countries over the period 2006-2015. The results provide evidence that supports a positive relationship between competition and banks' overall risk as well as their credit risk but suggests that off-balance sheet risk reduces with competition. We, therefore, conclude that the propensity to undertake higher risk in a competitive banking environment largely accounts for fragility as argued in the competitionfragility view.

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Section: Competitionmentioning

confidence: 99%

Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region

2018

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“…This is due to the economic boom and increasing demand for banking products and services (U. Athanasoglou et al, 2008;Davydenko, 2011;Dietrich & Wanzenried, 2014a;Flamini, McDonald, & Schumacher, 2009;Zeitun, 2012). With this mixed result, this study is an attempt to examine the positive relation of bank's profit and GDP growth in Saudi Arabia.…”

Section: Real Gdp Growth and Banks' Profitabilitymentioning

confidence: 99%

Asymmetric Impact of Oil Prices and Stock Prices on Bank’s Profitability: Evidence from Saudi Islamic Banks

Amin

2022

IJIEF

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The soundness of financial institutions including banks depends on both internal factors and external factors. The profitability of the banks largely affected by external shocks like oil prices and stock prices. As an oil-exporting country, Saudi economy particularly its banking sector largely rely on the oil prices. This study examines the asymmetric impact of oil prices and stock prices on Saudi Islamic banks’ profitability for the period 2000-2020. Two Saudi Islamic banks’ profitability is examined by the factors like Return on Equity (ROE) and Return on Assets (ROA) with the help of a nonlinear autoregressive distributed lag (NARDL) model. The estimated results are observed to be unbiased and robust. The results of this study show that OILP and STOCKP have significant role in determining the Islamic banks’ profitability in Saudi Arabia. Both higher oil prices and stock prices have positive influence on ROE and ROA of Saudi Islamic banks. This study suggest that development and efficiency of Saudi stock market is important and macroeconomic policy should support the country’s economic diversification. The management of Islamic banks need to focus on effective risk assessment and market monitoring tools to face the fluctuation of oil prices and their stock prices as these factors affect their profitability. Besides, Saudi Islamic banks need to diversify their investment portfolios into more productive and export oriented private sectors such as Small Medium Enterprises (SMEs). This strategic policy will enable Islamic banks to absorb any future shock of oil prices without affecting their profitability.

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“…The ROAA was measured by the ratio of the annual net income to the average total assets. We have chosen ROAA as the key proxy of profitability instead of the return on average equity (ROAE) because the analysis of ROAE does not take into consideration financial leverage and related risks (Flamini et al , 2009). Moreover, the ROAA is an appropriate profitability proxy that helps to compare firms either within the same industry or from different industries (Rasiah, 2010).…”

Section: Data and Pretest Analysismentioning

confidence: 99%

Long-run dynamics between CFP and CSP in the GCC banking sector: estimation of non-stationary heterogeneous panels allowing for cross-sectional dependence

Douissa

Azrak

2021

SRJ

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Purpose Causality between corporate financial performance (CFP) and corporate social performance (CSP) has been extensively debated in previous research works; however, little research has been done to investigate the long-run dynamics between these two constructs. The purpose of this paper is to enrich the CFP–CSP literature by estimating the long-run equilibrium relationship between financial performance and social performance in the banking sector in the Gulf Cooperation Council countries over the period 2009–2019. Design/methodology/approach The paper adopts an approach that is primarily used in financial economics: first, the authors perform panel long-run Granger causality following Canning and Pedroni’s procedure to indicate the direction of the causal relationship. Second, the authors estimate an error correction model using Chudik and Pesaran’s (2015) dynamic common correlated effects mean group estimator to determine the sign of the relationship. Findings The present research findings prove the existence of a long-run equilibrium relationship between CFP and CSP, while indicating at the same time that panel Granger causality runs positively from CSP to CFP, which means that changes in CSP produce lasting changes in CFP. Practical implications The findings of the paper would guide strategists to build fit for purpose corporate social responsibility (CSR) strategies in their firms and establish a continuous investment in CSR activities in the long run rather than harshly investing in CSR activities in the short run. Originality/value To the best of the authors’ knowledge, this paper is the first one to address heterogeneity in long-run Granger causality tests to estimate the relationship between CSP and CFP.

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The Determinants of Commercial Bank Profitability in Sub-Saharan Africa

Cited by 83 publications

References 21 publications

Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region

Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region

Asymmetric Impact of Oil Prices and Stock Prices on Bank’s Profitability: Evidence from Saudi Islamic Banks

Long-run dynamics between CFP and CSP in the GCC banking sector: estimation of non-stationary heterogeneous panels allowing for cross-sectional dependence

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