Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy

IF 1.2 Q3 BUSINESS, FINANCE

Journal of Emerging Market Finance Pub Date : 2020-04-01 DOI:10.1177/0972652719878597

B. Kusi, Lydia Dzidzor Adzobu, Alex Kwame Abasi, Kwadjo Ansah-Adu

{"title":"Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy","authors":"B. Kusi, Lydia Dzidzor Adzobu, Alex Kwame Abasi, Kwadjo Ansah-Adu","doi":"10.1177/0972652719878597","DOIUrl":null,"url":null,"abstract":"In this study, the effect of sectoral loan portfolio concentration on bank stability is investigated in the Ghanaian banking sector between 2007 and 2014. Specifically, we investigate the linearity and non-linearity effects of sectoral loan concentration on bank stability given the limited exploration of this nexus. Employing a two-step generalized method of moments (GMM) robust random and fixed effects panel models of 30 banks, the study provides evidence showing that sectoral loan concentration weakens the stability of banks. This confirms the concentration-fragility hypothesis and the diversification theory of traditional banking but may promote bank stability beyond a certain threshold point. This implies that bank sectoral loan concentrate has a direct non-linear U-shape effect on bank stability in Ghana. We argue that although sectoral loan concentration may weaken stability of banks in the short run, it may however enhance the stability of banks in the long run through prolonged expert knowledge, experience and understanding of sectors. From these findings, policymakers, regulators and bank managers must not only develop and design policies and regulations that prohibit sectoral loan concentration but should also incorporate plans and policies that encourage banks to develop core competence and competitive advantage to take advantage of advancing bank stability through sectoral loan concentration. JEL Codes: G10; G18; G41","PeriodicalId":44100,"journal":{"name":"Journal of Emerging Market Finance","volume":"19 1","pages":"66 - 99"},"PeriodicalIF":1.2000,"publicationDate":"2020-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0972652719878597","citationCount":"4","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Emerging Market Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1177/0972652719878597","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 4

Abstract

In this study, the effect of sectoral loan portfolio concentration on bank stability is investigated in the Ghanaian banking sector between 2007 and 2014. Specifically, we investigate the linearity and non-linearity effects of sectoral loan concentration on bank stability given the limited exploration of this nexus. Employing a two-step generalized method of moments (GMM) robust random and fixed effects panel models of 30 banks, the study provides evidence showing that sectoral loan concentration weakens the stability of banks. This confirms the concentration-fragility hypothesis and the diversification theory of traditional banking but may promote bank stability beyond a certain threshold point. This implies that bank sectoral loan concentrate has a direct non-linear U-shape effect on bank stability in Ghana. We argue that although sectoral loan concentration may weaken stability of banks in the short run, it may however enhance the stability of banks in the long run through prolonged expert knowledge, experience and understanding of sectors. From these findings, policymakers, regulators and bank managers must not only develop and design policies and regulations that prohibit sectoral loan concentration but should also incorporate plans and policies that encourage banks to develop core competence and competitive advantage to take advantage of advancing bank stability through sectoral loan concentration. JEL Codes: G10; G18; G41

查看原文本刊更多论文

行业贷款组合集中度与银行稳定性:来自新兴经济体的证据

在本研究中，研究了2007年至2014年间加纳银行业部门贷款组合集中度对银行稳定性的影响。具体而言，我们研究了部门贷款集中度对银行稳定性的线性和非线性影响，因为这种关系的探索有限。采用两步广义矩量法(GMM)对30家银行的稳健随机和固定效应面板模型，研究提供了证据表明，部门贷款集中度削弱了银行的稳定性。这证实了传统银行业的集中度-脆弱性假说和多元化理论，但可能会促进银行稳定性超过一定的阈值点。这意味着银行部门贷款集中度对加纳银行稳定性具有直接的非线性u型影响。我们认为，尽管行业贷款集中度可能在短期内削弱银行的稳定性，但通过长期的专家知识、经验和对行业的理解，它可能在长期内增强银行的稳定性。根据这些发现，政策制定者、监管机构和银行管理人员不仅必须制定和设计禁止部门贷款集中的政策和法规，而且还应纳入鼓励银行发展核心能力和竞争优势的计划和政策，以利用通过部门贷款集中促进银行稳定性的优势。JEL代码:G10;G18;G41

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Emerging Market Finance BUSINESS, FINANCE-

CiteScore

1.80

自引率

33.30%

发文量

期刊介绍： The Journal of Emerging Market Finance is a forum for debate and discussion on the theory and practice of finance in emerging markets. While the emphasis is on articles that are of practical significance, the journal also covers theoretical and conceptual aspects relating to emerging financial markets. Peer-reviewed, the journal is equally useful to practitioners and to banking and investment companies as to scholars.