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Open Access
Article
Publication date: 13 February 2023

Rexford Abaidoo and Elvis Kwame Agyapong

The study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions…

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Abstract

Purpose

The study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).

Design/methodology/approach

Data for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.

Findings

Reported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.

Practical implications

For policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.

Originality/value

The approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

Article
Publication date: 12 October 2021

Rexford Abaidoo, Elvis Kwame Agyapong and Kwame Fosu Boateng

This 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…

Abstract

Purpose

This 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/approach

Data 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.

Findings

The 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/value

This 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.

Details

Journal of Economic and Administrative Sciences, vol. 39 no. 4
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 3 October 2023

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development…

Abstract

Purpose

This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development among emerging economies in sub-Sahara Africa (SSA).

Design/methodology/approach

Data for the empirical inquiry were compiled from a sample of 25 economies from the subregion from 2010 to 2020. Empirical estimates examining the relationships noted above were carried out using the two-step system generalized method of moments estimation technique.

Findings

Results the empirical estimates suggest that regulatory policy uncertainty and macroeconomic risk adversely influence or constrain financial sector development among the economies examined in the study. Banking industry innovations on the other hand is found to positively influence the development of the financial sector in these economies. Furthermore, moderating empirical analysis suggests that effective governance positively moderates the relationship between banking industry innovations and financial development among economies in the subregion.

Originality/value

This study’s approach to the mechanics of financial development among economies in SSA is designed to offer different perspectives to those found in the existing literature on financial development in three fundamental ways. First, although the verification of the role of banking industry innovations in financial development may not be new, it is important to point out that the approach used in this study is based on an index for innovations with different constituents or principal components in its construction; making the variable significantly different from what has been examined in the literature. In addition, the review of regulatory policy uncertainty and macroeconomic risk (both variables are multifaceted constructs using the principal component analysis procedure) further brings into this study’s analysis, a different approach to examining conditions influencing variability in financial development among developing economies.

Details

Journal of Financial Economic Policy, vol. 15 no. 6
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 19 June 2023

Rexford Abaidoo and Elvis Kwame Agyapong

The study evaluates the effects of governance and other regulatory structures on the development of financial institutions in the subregion of sub-Saharan Africa (SSA).

Abstract

Purpose

The study evaluates the effects of governance and other regulatory structures on the development of financial institutions in the subregion of sub-Saharan Africa (SSA).

Design/methodology/approach

Data for the analyses were compiled from relevant sources from 1996 to 2019 from a sample of 36 countries in the subregion. Empirical analyses were carried out using the Prais-Winsten panel corrected standard errors panel estimation technique augmented by pooled ordinary least squares with Driscoll and Kraay (1998) standard errors model.

Findings

Findings from the study suggest that governance and institutional quality index, as well as individual governance and regulatory variables, have positive effect on the development of financial institutions among economies in SSA. Further empirical estimates show that output growth volatility has negative moderating impact on the relationship between effective governance, control of corruption, rule of law, regulatory quality, voice and accountability, and development of financial institutions. Additionally, the results show that during periods of heightened macroeconomic risk, financial institutions could benefit from improved governance and effective regulatory structures.

Originality/value

Compared to related studies that have reviewed the discourse on financial institutions, this study rather focuses on how governance structures and institutions influence development of financial institutions instead of the impact of financial institution on the broader economy. The authors further augment this interaction by examining how the relationship in question may be moderated by macroeconomic shocks.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 2 August 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data…

Abstract

Purpose

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Design/methodology/approach

The purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Findings

The results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion.

Originality/value

Unlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

Details

Journal of Financial Regulation and Compliance, vol. 31 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Open Access
Article
Publication date: 23 June 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

3026

Abstract

Purpose

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

Design/methodology/approach

Empirical estimations verifying various relationships are performed using the limited information maximum likelihood (LIML) estimation technique.

Findings

The results suggest that institutional quality enhances the pace of financial development among economies in the sub-region all things being equal. In a further micro-level analysis where components of institutional quality index are examined separately, the study’s results suggest that effective governance, regulatory quality, rule of law and accountability tend to have a significant positive impact on financial sector development.

Research limitations/implications

Findings of the study suggest that policies geared towards improving governance and regulatory institutions can augment development of the financial sector among economies in SSA; governments and policymakers are therefore encouraged to resource noted institutions to play effective roles for the development of the financial sector.

Originality/value

Compared to related studies, this study reorients existing paradigm, which emphasizes the role of governance and institutional variables in the economic growth discourse. The authors’ empirical inquiry rather focuses on how governance and institutional structures influence regional financial development dynamics. Specifically, this study differs from most macro-level studies found in literature because it examines the impact of hitherto unexamined governance and institutional variables on financial development among economies in SSA.

Details

Journal of Economics and Development, vol. 24 no. 3
Type: Research Article
ISSN: 1859-0020

Keywords

Article
Publication date: 11 July 2023

Elvis Kwame Agyapong, Louis David Junior Annor and Williams Ohemeng

This paper evaluates the effect of corporate social responsibility (CSR) on the performance of rural banks, as well as the moderating influence of effective governance on the…

Abstract

Purpose

This paper evaluates the effect of corporate social responsibility (CSR) on the performance of rural banks, as well as the moderating influence of effective governance on the surmised nexus.

Design/methodology/approach

Annual data for 122 Ghanaian rural banks from ARB Apex Bank, World Development Indicator (WDI) and World Governance Indicator (WGI) for the period 2014–2020 were compiled for analysis. A two-stage system generalized method of moments (GMM) estimator was used in examining the relationships under study.

Findings

The findings suggest that CSR has a significant negative effect on return on assets (ROA), return on equity (ROE) and stability (Z-score). On the other hand, further results showed that CSR positively influences net interest margin (NIM). Again, the results suggest that government effectiveness exerts a positive moderating influence on the effect of CSR on performance from all four measurement criteria (ROA, ROE, NIM and Z-score) in the Ghanaian rural banking sector.

Originality/value

The study focuses on the rural banking sector in the Ghanaian economy, compared to related studies that examine the subject matter for commercial banks. The moderating influence of governance structures is also assessed on the relationships to guide policy on rural banking.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2023-0116.

Details

International Journal of Social Economics, vol. 51 no. 1
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 14 March 2023

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines the dynamics of financial institution development among economies in sub-Saharan Africa (SSA) and how volatility in forex-adjusted price of key globally…

Abstract

Purpose

This study examines the dynamics of financial institution development among economies in sub-Saharan Africa (SSA) and how volatility in forex-adjusted price of key globally traded, commodities and macroeconomic risk influence such development.

Design/methodology/approach

The study is based on data collected from the period starting 2001 to 2019 for relevant variables; and the empirical test was performed using the two-step system generalized method of moments (TSS-GMM) estimation method.

Findings

Empirical estimates suggest that volatility in forex-adjusted prices of crude oil and cocoa are inimical to development of financial institutions among economies in the sub-region. On the other hand, volatility in the price of gold is found to have a significant positive effect on development of financial institutions. Additionally, political instability is found to exacerbate the adverse effect of volatility in the price of globally traded commodities on the development of financial institutions in the sub-region.

Originality/value

The study verifies how volatility in forex-adjusted prices of key traded commodities on the global market influence development of financial institutions in the sub-region. Additionally, the study examines the impact of macroeconomic risk, a principal component analysis (PCA) constructed index on the development trajectory of financial institutions. Finally, the authors examine the moderating role of institutional quality and political instability in the relationship in question.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 30 November 2021

Rexford Abaidoo and Elvis Kwame Agyapong

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.

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.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Open Access
Article
Publication date: 3 August 2021

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run.

Abstract

Purpose

This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run.

Design/methodology/approach

The study employs error correction autoregressive distributed lagged (ARDL) model (ECM) to examine how micro-level variables influence volatility associated with corporate performance in the short run.

Findings

This paper finds that disaggregated or micro-level variables examined, tend to exhibit features that are not readily apparent from the aggregate variable from which such variables are derived. For instance, reported empirical estimate suggests that, growth in expenditures on services and nondurable goods tend to lower volatility associated with corporate performance, whereas government expenditures and expenditures on durable goods rather worsens volatility associated with corporate performance, all things being equal. Additionally, presented empirical estimates further provide evidence suggesting that macroeconomic uncertainty and inflation uncertainty significantly moderate or influence the extent to which disaggregated variables impact corporate performance volatility.

Originality/value

Compared to related studies in the reviewed literature, this study rather examines volatility associated with corporate performance instead of the corporate performance indicator itself. Additionally, this paper also examines how disaggregated variable instead of aggregate variables impact such volatility. Finally, the moderating role of key macroeconomic conditions in such a relationship is also examined.

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