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The persistence of profits of banks in Africa

Author

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  • Mohammed Amidu

    (University of Ghana Business School)

  • Simon K. Harvey

    (University of Ghana Business School)

Abstract

This paper analyses the profit persistence of African banking sector, focusing on the role of the level of competition and banks earnings management. We apply Markov chain to analyse the extent and mobility of profit persistence, dynamic auto regressive model to assess the speed of convergence and the quantile regression technique to examine the determinants of profit persistence of banks in Africa. The results show a high level of profit persistence and relatively low speed of convergence. There is also evidence that regulation and banks earnings management affect both the level and persistence of banks profitability. We also find that competition as well as 2007/2008 financial crisis reduce the level and the speed of profit persistence.

Suggested Citation

  • Mohammed Amidu & Simon K. Harvey, 2016. "The persistence of profits of banks in Africa," Review of Quantitative Finance and Accounting, Springer, vol. 47(1), pages 83-108, July.
    • Handle: RePEc:kap:rqfnac:v:47:y:2016:i:1:d:10.1007_s11156-014-0495-8
    DOI: 10.1007/s11156-014-0495-8
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    3. Richard Oduro & Francis Kwaw Andoh & Samuel Gameli Gadzo, 2022. "Dynamics and Drivers of Competition in the Ghanaian Banking Industry," International Journal of Global Business and Competitiveness, Springer, vol. 17(2), pages 175-191, December.
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    5. Adeabah, David & Abakah, Emmanuel Joel Aikins & Tiwari, Aviral Kumar & Hammoudeh, Shawkat, 2023. "How far have we come and where should we go after 30+ years of research on Africa's emerging financial markets? A systematic review and a bibliometric network analysis," Emerging Markets Review, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    Banks; Imperfect market; Bank earnings; Markov chain; Developing countries;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • N27 - Economic History - - Financial Markets and Institutions - - - Africa; Oceania

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