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Financial Literacy, Financial Innovation, and Financial Inclusion as Mitigating Factors of the Adverse Effect of Corruption on Banking Stability Indicators

Author

Listed:
  • João Jungo

    (University of Aveiro)

  • Mara Madaleno

    (University of Aveiro)

  • Anabela Botelho

    (University of Aveiro)

Abstract

The purpose of this study is to examine the ability of financial literacy, financial innovation, and financial inclusion to mitigate the adverse effect of corruption on banks’ credit risk, profitability, and financial stability, with this joint inclusion being the novelty explored. Furthermore, we aim to compare the results across four different groups of countries, namely African, Asian, American, and European countries. The Feasible Generalized Least Squares (FGLS) estimation results indicate that corruption increases credit risk, reducing profitability and bank stability, being these effects mitigated by financial literacy, financial innovation, and financial inclusion. Furthermore, we find that financial literacy, financial innovation, and financial inclusion reduce credit risk while increasing bank profitability and stability. These results enable policymakers and managers to promote inclusion, innovation, and financial literacy to achieve banking sector stability while combating corruption.

Suggested Citation

  • João Jungo & Mara Madaleno & Anabela Botelho, 2024. "Financial Literacy, Financial Innovation, and Financial Inclusion as Mitigating Factors of the Adverse Effect of Corruption on Banking Stability Indicators," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8842-8873, June.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:2:d:10.1007_s13132-023-01442-2
    DOI: 10.1007/s13132-023-01442-2
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    More about this item

    Keywords

    Financial literacy; Financial innovation; Financial inclusion; Corruption; Credit risk; Profitability; Banking stability;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services

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