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Do Banking Institutions Respond to Incentives? Banking Awards and Stability Evidence from an Emerging Economy

Author

Listed:
  • Lord Mensah
  • Charles Andoh
  • Saint Kuttu
  • Baah Aye Kusi

    (University of Ghana Business School)

Abstract

This study investigates how banking awards influence stability in the banking sector of Ghana. We employ a robust random effect panel model of 30 banks between 2007 and 2014 and the results show that banking institutions respond to incentives in the form of awards. However, banking stability is weakened when previous year awards are concentrated in fewer individual banks. These imply that awards at the industry and individual bank levels promotes and weakens stability, respectively. From these findings, it is obvious that regulators of banks can rely on industry-level focused awards to reinforce stability but not on individual bank level focused awards. Also, organizers of banking awards in conjunction with regulators should structure and design banking awards to avoid concentration of awards in few banks and to be industry oriented.

Suggested Citation

  • Lord Mensah & Charles Andoh & Saint Kuttu & Baah Aye Kusi, 2019. "Do Banking Institutions Respond to Incentives? Banking Awards and Stability Evidence from an Emerging Economy," The African Finance Journal, Africagrowth Institute, vol. 21(1), pages 23-49.
    • Handle: RePEc:afj:journl:v:21:y:2019:i:1:p:23-49
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    File URL: https://journals.co.za/content/journal/10520/EJC-16fafa348f?fromSearch=true
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    Cited by:

    1. Kusi, Baah & Agbloyor, Elikplimi & Asongu, Simplice & Abor, Joshua, 2021. "Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter?," MPRA Paper 110136, University Library of Munich, Germany.

    More about this item

    Keywords

    Awards; Banks; Incentives; Stability;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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