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Banking industry stability and investment dynamics

Rexford Abaidoo (Department of Business Management and Accounting, University of Maryland Eastern Shore, Princess Anne, Maryland, USA)
Elvis Kwame Agyapong (Department of Finance, Ghana Institute of Management and Public Administration, Accra, Ghana)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 30 November 2021

Issue publication date: 25 March 2022

279

Abstract

Purpose

This paper aims to evaluate how strands of differing investments influence stability in the banking industry using data from 37 countries in Sub-Sahara Africa from 2000 to 2018.

Design/methodology/approach

Empirical analyses in the study were carried out using a two-step system Generalized Method of Moments estimation methodology.

Findings

Empirical results suggest that generally, growth in investments by governments, foreign investments and private domestic investments have a significant positive impact in stabilizing the banking industry. The empirical estimates further suggest that macroeconomic conditions such as macroeconomic uncertainty adversely affects the liquid reserve position of banks even during periods of appreciable growth in investments.

Originality/value

The authors present a different approach to the banking industry discourse. Instead of surmise the relationship with the direction of impact often emanating from the banking industry to other variables of interest or conditions, this study rather examines how investment dynamics among economies influence the stability of the banking industry overtime. In contrast to related studies, this study examines how strands of investment variables influence the stability of the banking industry. Specifically, this study is modeled to examine the extent to which variability in investment growth (using different investment variables) affect stability in the banking industry.

Keywords

Citation

Abaidoo, R. and Agyapong, E.K. (2022), "Banking industry stability and investment dynamics", Journal of Financial Regulation and Compliance, Vol. 30 No. 2, pp. 215-239. https://doi.org/10.1108/JFRC-06-2021-0049

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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