Impact of the banking sector reform in the construction sector

Abstract

Purpose

Banking sector reforms can impact the development of the real sector. However, there is very little known about this impact on the construction sector in a developing country context. This study aims to evaluate the impact of the banking sector reform on the construction output (CNS) using the banking sector reform in Nigeria in 2005 (2005 Banking Sector Reform Programme [BSRP]) as a case.

Design/methodology/approach

This study used econometric methodology comprising unit root test for stationarity, Johansen test for cointegration, analysis of variance (ANOVA) and the analysis of covariance. Time series data covering a period from 1981 to 2017 (37 years) about the banking and construction sector performances are analyzed using ten-time series equations.

Findings

The ANOVA estimates reveal that the 2005 BSRP positively impacted the CNS and construction sector growth rate. However, the ANOVA estimates reveal that the gross domestic product (GDP) and bank total loan had a positive impact on CNS in the period (1981–2017) before and after the 2005 BSRP, and consequently removing the effect of the 2005 BSRP on CNS.

Practical implications

This paper concludes that the banking sector reform has a positive impact on CNS in the Nigerian construction industry. The impact is greater and lasting when the reform is directly targeted at improving CNS.

Originality/value

This study provides empirical evidence of the dependence between banking sector reform and construction sector performance in a developing country context. Also, this study demonstrates the relationship between GDP, banking sector reform and construction sector performance in a developing country context.

Citation

Saka, N. and Olanipekun, A.O. (2021), "Impact of the banking sector reform in the construction sector", Journal of Financial Management of Property and Construction, Vol. 26 No. 3, pp. 387-407. https://doi.org/10.1108/JFMPC-03-2020-0012