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Evaluating profitability strategies and the determinants of the risk performance of sectoral and banking institutions

Author

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  • Walter Amedzro St-Hilaire
  • Patrick Boisselier

Abstract

Purpose - The purpose of this paper is to evaluate the need to incorporate the loan loss provisions (LLPs) and risk measures in order to examine the repercussions on advancing approach and profitability. Design/methodology/approach - The study investigates the effect of explanatory variables on profitability and advancing approach of the banks. The variables used in this study were determined, based on the review of relevant literature and established according to the availability of data for measurement purposes. Inspired by previous research, Hausman test is used in this study to determine whether a random or fixed effects generalized least squares model is best. The linear regression model is applied to strongly balanced panel data obtained from the ten commercial banks. Findings - The findings demonstrate that Nigerian banking sector considers LLPs in terms of its decision making of advancing approach, while proper inclusion of credit, market and operational risk is more important for South Africa’s banks rather than the maintenance of provisions. Originality/value - Moreover, the credit risk proves to be more needed factor of consideration for Nigerian rather for South African banks. This is an answer to the strong economy of South Africa as compared to Nigeria and more chances of default faced by Nigerian banks.

Suggested Citation

  • Walter Amedzro St-Hilaire & Patrick Boisselier, 2018. "Evaluating profitability strategies and the determinants of the risk performance of sectoral and banking institutions," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 34(3), pages 174-186, October.
    • Handle: RePEc:eme:jeaspp:jeas-08-2017-0078
    DOI: 10.1108/JEAS-08-2017-0078
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    Citations

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    Cited by:

    1. Lili Wang & Yingjian Su, 2023. "Economic Loss and Financial Risk Assessment of Ecological Environment Caused by Environmental Pollution under Big Data," Sustainability, MDPI, vol. 15(4), pages 1-16, February.
    2. Ebrahim Mohammed Al‐Matari, 2023. "The determinants of bank profitability of GCC: The role of bank liquidity as moderating variable—Further analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1423-1435, April.

    More about this item

    Keywords

    Economics; Performance management; Decision making; Corporate strategy; Risk management; Auditing; Finance and banking; Profitability strategies; Experimental studies; Financial research; F29; F36; G19; G29; M00; P00;
    All these keywords.

    JEL classification:

    • F29 - International Economics - - International Factor Movements and International Business - - - Other
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General

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