Title: Financial development and banking industry stability

Authors: Rexford Abaidoo; Elvis Kwame Agyapong

Addresses: University of Maryland Eastern Shore, EASC Building Room 2094, Princess Anne, MD 21875, USA ' Ghana Institute of Management and Public Administration, GIMPA Green Hill, Achimota, Accra, Ghana

Abstract: The banking industry plays an important role in the development of economies globally. This study examines the importance of the banking industry to the development of the financial system in Sub-Saharan Africa (SSA) by specifically verifying the effect of four bank stability variables on development of the entire financial system. Data for the study were compiled from 19 countries in the sub-region from 2001 to 2018; and the empirical estimates performed using the Prais-Winston panel corrected standard errors (PW-PCSE) estimation technique. The results suggest that bank liquid reserves and bank Z-score have significant positive effect on financial development. Growth in non-performing loans on the other hand is found to be inimical to the development of the financial sector all things being equal. The results further show that inflation uncertainty has significant positive moderating influence on bank liquid reserves - financial development and non-performing loans - financial development nexuses.

Keywords: financial development; banking industry stability; Prais-Winston panel corrected standard errors; PW-PCSE; governance quality; inflation uncertainty.

DOI: 10.1504/IJEBR.2024.138071

International Journal of Economics and Business Research, 2024 Vol.27 No.3, pp.351 - 373

Received: 23 Jul 2021
Accepted: 16 Sep 2021

Published online: 21 Apr 2024 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article