TITLE:
Quantifying the Link between Financial Development and Bank Profitability
AUTHORS:
Shani Bashiru, Alhassan Bunyaminu, Ibrahim Nandom Yakubu, Mamdouh Abdulaziz Saleh Al-Faryan, John Mac Carthy, Kofi Afriyie Nyamekye
KEYWORDS:
Financial Development, Bank Profitability, Sub-Saharan Africa, GMM
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.2,
April
19,
2023
ABSTRACT: This study seeks to examine the impact of financial
development on bank profitability in Sub-Saharan Africa (SSA). We also
investigate how institutional quality, bank stability, financial openness, and
competition affect profitability. The researchers employ data from 33 countries
covering from 2000 to 2017. Using the generalized method of moments (GMM)
technique, the findings show that financial development exerts a negative
significant effect on banking sector profitability. This result holds
regardless of the indicator of profitability. This indicates that financial
development dampens profitability in SSA. The study also reveals that
institutional quality and bank stability positively and significantly influence
profitability. We further observe that the impact of financial openness and
competition on profitability significantly differs depending on the measure of
profitability. The study discusses key implications for policy.