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Bank profitability in Sub-Saharan Africa: does economic globalization matter?

Author

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  • Ibrahim Nandom Yakubu
  • Alhassan Bunyaminu

Abstract

Purpose - This study aims to examine the impact of economic globalization on bank profitability in Sub-Saharan Africa. Design/methodology/approach - The empirical analysis is based on panel data of banks spanning 2008–2016. Relying on the KOF Globalization Index, the study uses financial globalization and trade globalization as measures of economic globalization. The authors employ the system generalized method of moments technique to establish the relationship between economic globalization and bank profitability while controlling for the effect of bank-specific and macroeconomic factors. Findings - The results show a negative significant effect of financial and trade globalization on bank profitability, signifying the intense competition of banks in Sub-Saharan Africa accelerated by globalization. The negative effect of economic globalization holds irrespective of the indicator of bank profitability. Bank size exerts a significant effect on profitability though the impact is negative for return on equity measure. The findings further reveal a positive significant impact of GDP growth and inflation on profitability. Originality/value - This paper presents a pioneering work on the impact of economic globalization on bank profitability in the Sub-Saharan African context per the researchers' knowledge.

Suggested Citation

  • Ibrahim Nandom Yakubu & Alhassan Bunyaminu, 2022. "Bank profitability in Sub-Saharan Africa: does economic globalization matter?," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 40(3), pages 673-683, February.
    • Handle: RePEc:eme:jeaspp:jeas-08-2021-0158
    DOI: 10.1108/JEAS-08-2021-0158
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    More about this item

    Keywords

    Economic globalization; Bank profitability; System GMM; Sub-Saharan Africa; F62; G20; G21;
    All these keywords.

    JEL classification:

    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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