Joseph Olorunfemi Akande

Stimulating competition in the bank system without compromising the stability constitutes a major puzzle that bank regulators and practitioners face. Hitherto, empirical studies focusing on Sub-Saharan Africa in addressing these issues for the anticipated regional integration and sustainable growth are rare. This study applied structural equation modelling to simultaneously analyze competition, regulation and stability in a panel of 440 Sub-Saharan African commercial banks over the period from 2006 to 2015. The results provided evidence that competition affects stability via efficiency and that regulation affects stability via competition and efficiency. This study produced critical theoretical and methodological insights with substantial implications for the conduct of bank regulatory policy.

Political risk is prevalent in Nigeria and tends to influence business outcomes and the stability of the banking system. As a result of this study, it was determined whether political risk matters to the performance of the banking sector in Nigeria. The effect of political risk on different banks’ performance measures, such as return on assets, return on invested capital, credit risk and stock price, were examined in a panel of 12 selected commercial banks for the period 2006–2018. Data was analyzed using a two-stage system of generalized method of moments. The results provided evidence that the effect of political risk on bank performance depends on the performance proxies. Specifically, political risk was found to be negatively related to banks’ returns on invested capital and positively related to deteriorating credit risk. Hence, it can be concluded that political risk induces poor banking system performance in Nigeria. The study provides a critical insight into the management of a country’s political systems in terms of their potential to create unfavorable conditions for banking systems to thrive.