Bank Governance, External Regulations and Risk-Taking Behaviours of Banks in Africa

This paper investigates the joint effect of bank governance and regulations in explaining banks’ risk-taking behaviours in 52 African countries over the period, 2006-2018. The findings reveal that strong bank governance structure and regulations (monetary policy, macro-prudential and central bank lending limit) reduce the risk-taking behaviours of banks. The study presents evidence that bank governance reduces the risk-taking behaviours of banks at higher levels of monetary policy, macro-prudential and central bank lending limit. It further shows that at higher levels of regulations, the reductive effect of bank governance on risk-taking is more significant in countries that are more likely to face banking crisis than those that are less likely to face banking crisis. Again, the study found that at higher levels of regulations, the reductive effect of bank governance on risk-taking is more significant in countries operating in upswings of financial cycles compared to those in the downswings.